In the wake of Franklin Pierce University’s bond rating being reduced by leading credit rating agencies, President of the school’s faculty union Douglas Ley says faculty are more than a little concerned. Both Standard and Poor’s and by Moody’s Investor’s Service, Inc. have given the university a negative outlook, barring a sudden positive development for the school.
Standard and Poor’s and Moody’s are credit rating agencies that publish financial research and analysis on stocks and bonds, and are known for their stock market indices. Bond issuers use ratings from agencies, such as Standard and Poor’s, to make determinations about whether an institution has the ability to meet its financial commitments. Standard and Poor’s recently lowered Franklin Pierce’s bond rating from B to CCC, and gave it a negative outlook, according to Ashley Ramchandani, an associate with Standard and Poor’s Rating, in a podcast interview distributed by Standard and Poor’s on July 25. Moody’s also lowered its rating of the school, going from B3 to Caa3. The new rating is indicative that Standard and Poor’s and Moody’s consider Franklin Pierce to be vulnerable, and dependent upon favorable business, financial and economic conditions to meet its financial commitments. In Moody’s ratings, institutions rated Caa3 are judged to be of poor standing and are subject to very high credit risk. The rating action was prompted by a failure on the part of Franklin Pierce to make a required monthly deposit to its debt service fund in April, and the loss of a line of credit by the university in September. According to Ramchandani, the university had been relying on that line of credit to offset seasonal cash flow issues.