Missouri Western State University Bond Ratings Lowered To #BBB+# On Deteriorating Financial Profile

Stocks and Financial Services Press Releases Thursday January 11, 2018 09:11
CHICAGO--11 Jan--S&P Global Ratings

CHICAGO (S&P Global Ratings) Jan. 10, 2018--S&P Global Ratings lowered its long-term rating on Missouri Western State University's (MWSU) series 2008, 2010B, and 2012 to 'BBB+' from 'A-'. At the same time, S&P Global Ratings lowered its underlying rating (SPUR) 'on MWSU's series 2015 auxiliary system revenue bonds to 'BBB+' from 'A-'.

The outlook is stable. "We lowered the rating based on a deteriorating financial profile," said S&P Global Ratings credit analyst Gauri Gupta. MWSU has a growing operating deficit with a first time cash deficit in fiscal 2017 and subsequent weakening of the financial resources as measured by unrestricted net assets (UNA), which are no longer commensurate with the 'A' rating category.

We assessed MWSU's enterprise profile as strong, characterized by a stable and tenured management team and a long history of operations as a four-year institution offering a broad array of programs and stabilizing enrollment with increase in total full-time equivalents (FTE) for fall 2017 after several years of decline coupled with some improvement in demand metrics such as better selectivity although matriculation and graduation continue to remain weak.

We assessed MWSU's financial profile as adequate, characterized by persistent full-accrual deficits that are widening in nature with a first year of cash deficit in fiscal 2017, subsequent weakening of the financial resources and decline in state support that we previously expected to increase for the next few years. Combined, we believe these credit factors lead to an indicative stand-alone credit profile of 'bbb+' and a long-term rating of 'BBB+'. The stable outlook reflects our expectation that during the two-year outlook period, the university will continue to stabilize enrollment with modest growth in FTE going forward while maintaining demand metrics.

Although pressured, we also expect that the university's steps to improve operations will result in narrower deficits for fiscal 2018 and beyond. At the same time, we expect that auxiliary system operations will continue to produce surpluses and adequate debt service coverage (DSC) and the university will maintain financial resources at least at current levels. We currently do not expect MWSU to issue any additional debt. We could take a further negative rating action if enrollment starts to decline again such that full-accrual deficits widen or if financial resource ratios continue to weaken to levels no longer commensurate with current rating. We would also view further decline in debt service coverage for auxiliary system revenue bonds negatively. Although unlikely during the outlook period, we could consider an upgrade if the university continues to stabilize enrollment and operations improve toward break-even on a full-accrual basis while growing its financial resource ratios to levels commensurate with a higher rating. Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com.

All ratings affected by this rating action can be found on the S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.

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