Fitch Rates Previously Issued Rutgers University (NJ) Rev Bonds 'AA-'; Outlook Stable
--$36.1 million of general obligation (GO) refunding bonds, 2010 series I;
--$201.1 million of GO bonds, 2009 series F;
--$391 million of GO bonds, 2010 series H.
The Rating Outlook is Stable.
GO bonds are unsecured general obligations of Rutgers, payable from all legally available funds.
KEY RATING DRIVERS
STRONG DEMAND PROFILE: As the state's flagship institution of higher education and research, Rutgers enjoys strong student demand with growing enrollment and high student-quality indicators, and robust fundraising ability. Counterbalancing these strengths is its relatively high tuition for a public institution, though common among New Jersey's public colleges and universities, and significant out-migration of the state's college-going population.
INTEGRATION RISKS WANING: The rating continues to incorporate operating and administrative risks associated with the 2013 integration of the majority of the former University of Medicine and Dentistry of New Jersey's (UMDNJ) medical schools into Rutgers pursuant to the New Jersey Medical and Health Sciences Education Act of 2012, although the integration appears to be progressing successfully to date. The shift in Rutgers' profile was partly offset by the historically solid demand for UMDNJ's academic programs driven by its role as NJ's primary provider of public medical education.
PRESSURED OPERATING MARGINS: As expected, Rutgers' historically solid financial profile has been pressured following the integration, with the university generating deficits on a full accrual basis in fiscals 2013 and 2014, after a track record of healthy financial results pre-integration, and weaker liquidity and leverage metrics.
DIVERSE REVENUES, BUT VOLATILE STATE FUNDING: Rutgers' diverse revenue base, supported by consistent growth in enrollment and related net tuition and fee revenue, partially mitigates concern over a reduction in direct state operating appropriations for fiscal 2016 and uncertainty going forward, after several years of relatively flat funding.
SUCCESSFUL UMDNJ INTEGRATION: Continuation of Rutgers University's successful integration of the medical schools and administrative functions of the former University of Medicine and Dentistry of New Jersey (UMDNJ), demonstrated by a restoration of breakeven or better financial performance, may result in upward rating potential over the medium term.
STUDENT DEMAND: With one-third of Rutgers University's total operating revenues derived from student charges, rating stability is predicated on Rutgers maintaining strong student demand characteristics.
For additional information on Rutgers University, please see Fitch's Rating Action Commentary dated July 29, 2015, 'Fitch Affirms Rutgers University (NJ) Rev Bonds at 'AA-'; Stable Outlook', which is available at 'www.fitchratings.com'.