Rating Action: Moody’s withdraws P-1 rating on Rutgers University, NJ’s CP Series E in conjunction with SBPA expiration
New York, July 31, 2020 — Moody’s Investors Service has withdrawn the P-1 rating on Rutgers, The State University of New Jersey’s (NJ) General Obligation Commercial Paper Series E (Federally Taxable), in conjunction with the expiration of the standby bank purchase agreement (SBPA) associated with this series of commercial paper. We maintain a P-1 rating on General Obligation Commercial Paper Series A (Tax-Exempt), Series B (Tax-Exempt), Series C (Federally Taxable), and Series D (Extendable Tax-Exempt), which are supported by a separate SBPA. We also maintain Aa3 and Aa3/VMIG 1 on approximately $2.1 billion of outstanding debt as well as the Aa3 on proposed approximately $200 million General Obligation Refunding Bonds, 2020 Series S (Federally Taxable), which was assigned on February 24, 2020. The outlook for the long-term underlying debt is stable.
The withdrawal of the P-1 rating reflects the expiration of liquidity support for the Series E commercial paper with no associated outstanding CP. We are maintaining the university’s other short-term ratings on variable rate bonds and Series A-D commercial paper. The VMIG 1 and P-1 short-term ratings incorporate the strength of the underlying rating as well as the bank liquidity facilities supporting them and established procedures for prompt repayment in the event of a failed remarketing. For Series A, B, C, and D commercial paper, the SBPA expires April 10, 2021. For Series 2009G variable rate bonds, the SBPA expires on July 1, 2023.
The long term Aa3 rating reflects the university’s large scope, important state role as a leading provider of higher education and healthcare, management experience in oversight of significant operational shifts, and good financial reserves. All of these factors provide Rutgers with sufficient runway to manage through near-term operating volatility associated with the coronavirus pandemic. The coronavirus (COVID-19) situation has created dislocation across industries and geographies and triggered urgent challenges for many businesses and organizations to address. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. For fiscal 2020, Rutgers’ projects a modest operating deficit, requiring the use of an estimated $60 million of reserves, significantly improved from an initial estimate of approximately $200 million in revenue declines. This reflects management’s ability to trim expenses to offset reduced revenue, including reduced state funding, as well as support from the CARES Act. Fall 2020 courses will be held largely online, and residence hall occupancy is expected to be significantly reduced. Management has budgeted accordingly, including for declines in other auxiliary revenue, state support, and some enrollment fluctuation in fiscal 2021. Budget estimates are revised as new information is available, including union negotiations, and the university continues to work to close an expected budget gap.
The university’s stable long-term outlook incorporates prospects for manageable financial impacts from the coronavirus pandemic, in part due to management’s offsetting actions, with limited debt increases.
Rutgers’ general obligation bonds, lease revenue bonds, and commercial paper are payable from all legally available revenue and fund balances. The university has covenanted that it will charge and collect tuition, fees, rents, charges and other revenues which, together with other legally available funds, will be sufficient to make all debt service payments on time and to meet all other obligations of the university.
Rutgers, The State University of New Jersey, is the State of New Jersey’s flagship, land grant, and comprehensive research university. With campuses strategically located throughout the state in New Brunswick, Newark, and Camden and the university’s academic health center, Rutgers Biomedical and Health Sciences, the university’s full-time equivalent enrollment is over 62,000. Annual operating revenue is almost $4.3 billion.
The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.
This rating is solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Susan Shaffer Lead Analyst Higher Education Moody's Investors Service, Inc. 7 World Trade Center 250 Greenwich Street New York 10007 US JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Susan Fitzgerald Additional Contact Higher Education JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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