In these dark financial times, a rare—very rare—ray of economic light is shining on American University.
“We have been operating with a financial management strategy for some time that has taken a very conservative approach that I believe is helping us,” vice president of finance and treasurer Don Myers told Inside Higher Ed in a story praising AU’s financial positioning.
The piece comes on the heels of Standard and Poor’s Ratings Services (S&P) Sept. 24 upgrade of AU’s revenue bonds and its issuer credit rating. The agency cited strong operating results, strong financial performance in fiscal 2009, continued enrollment growth, and low debt service burden. Year to date, S&P has upgraded only one other private university’s credit rating.
In the report, S&P raised its long-term and underlying ratings to A+ from A on the District of Columbia’s revenue bonds issued for American University. Standard and Poor’s also raised its issuer credit rating to A+ from A on American University.
“The upgrade is a reflection of the university’s overall strength, and confidence in the direction the university is taking,” said Gary Cohn, president and chief operating officer of Goldman Sachs, and chairman of the American University Board of Trustees’ Finance and Investment Committee. “An upgrade is an extraordinary accomplishment for the university in this economic and credit climate.”
“American University has had a 20-plus year strategy of conservative financial management,” Myers said. “In good times, we built a strong financial underpinning and developed safeguards, including establishing budgeted reserves and contingency funds. We constructed our operating budgets with little reliance on endowment income. More recently, we restructured $220 million of our tax-exempt debt in advance of the deteriorating credit markets.”
These initiatives are now enabling AU to borrow at favorable rates, hire new faculty, increase salaries, and continue construction and renovation projects during a challenging economic environment.
In its report, Standard and Poor’s cited the university’s continued strong operating performance and steady enrollment, and its expectation that the university will maintain financial resources at or near current levels, and manage additional debt and capital spending prudently during the next two years.