S&K Conference – Bond Ratings Session


What is a bond rating – a ranking system based on criteria. Purpose is to generate report cards of economic and financial health for people who buy educational bonds. Bond investors are less knowledgeable than board members.

  • 21 categories
  • no relationship with US News and World Report

Top 10 used

AAA is the best followed by AA1 AA2 AA3 A1 A2 A3 Baa1 Baa2 Baa3

Things they review for bond ratings

market position
Prospective Students / Retention

Management Governance
Presidential Leadership / Senior Leadership team

Operational Results and Balance Sheet
Operating margins, debt service, fund raising capacity, size and financial restrictions

Debt capacity and structure
Degree of operating, balance sheet leverage, future capital needs, use of variable rate debts and swaps

Data they review
Total resources as compared to debt
Expendable resources to debt
Expendable resources to revenue
Operating Margin %
Net tuition per student
Tuition discount %
Net Tuition and auxiliary revenue contribution %

Over the last 6 years more schools have been upgraded rather than downgraded.

Observations:

  • Strong president is essential but dangerous
  • higher ed explains itself poorly
  • higher ed has a great business model

Challenges:

  • demographic changes
    key strategies to meet challenge – retention, improve student services, endowment for fin aid, diversity in staff and faculty
  • Geography – where students come from
    key strategies to meet challenge – expand recruiting territories, use of facilities in summer, partnerships with schools abroad and in urban areas, more on-line investments
  • pricing for value – market will tolerate tuition increases
    key strategies to meet challenge – career placement, market oriented degrees, partnerships with employees
  • Student load access – 08/09 likely to be roughest year
  • Better staffing needed
  • Financial Complexity
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One Response to S&K Conference – Bond Ratings Session

  1. […] Higher Ed Web Marketing a blog by Paul Redfern about higher ed web marketing and other things « S&K Conference – Bond Ratings Session […]

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