Bond Rating Agency Changes IWU Outlook To Negative | WGLT

Bond Rating Agency Changes IWU Outlook To Negative

Nov 28, 2018

A bond rating agency said its outlook on Illinois Wesleyan University is negative and no longer stable. Enrollment grew this year at the liberal arts school in Bloomington. But, Moody's Investors Service says a legacy of falling enrollment and net tuition revenue at IWU will contribute to imbalanced operations as existing smaller class sizes cycle through the school.


University President Eric Jensen said this is not a problem for his school.


"The outlook is partly a function of Moody's perceptions of the industry. Standard and Poor's is the other rating agency and S and P reaffirmed our rating. In their case it's A-minus, which is the equivalent level, but they also affirmed the outlook as stable," said Jensen.


Moody's maintained its rating of IWU at Baa1. 


Moody's said spendable cash and investments have declined over the last four years for IWU as the university has drawn on its endowment more than the 5 percent annual industry average. Jensen declined to say how much IWU is above the norm, citing propriety and competitive considerations.


Most colleges and universities use proceeds from investment of endowment funds to offer scholarships. IWU is no exception.


Jensen also said part of that draw down on endowment is intentional and strategic.


"Most colleges and universities are heavily reliant on tuition revenue. And we had a couple of smaller classes. We wanted to invest and be able to drive our tuition revenue. Last May's results were just hugely encouraging on that front," said Jensen.


Moody's acknowledged increased enrollment this year, but said smaller class sizes the last several years have yet to work their way through, and that will reduce tuition revenue.


IWU has about $55 million of bonds Jensen said it refinanced in 2016. The money raised from that borrowing went to buildings.


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