S&P Global Ratings lowered its rating outlook to negative from stable on Loyola University of New Orleans, citing weakening enrollment.
The agency rates the school's debt BBB. As of summer 2023, the school had $283 million in debt outstanding.
"The negative outlook reflects a significant decline in total enrollment in fall 2024 due to challenges caused by turnover in the admissions office, with uncertainty whether enrollment will rebound in fall 2025," S&P Associate Director Kimberly Barrett wrote in a report Wednesday.
From fall 2017 to fall 2022 the average freshmen class size was 800, but in fall 2023 it fell to about 700 and this fall is expected to be about 580, the report said. The university's leadership "is committed to quickly rebuilding the admissions office, and believes enrollment will rebound quickly," Barrett wrote.
The school has a history of "fluctuating enrollment" and experienced weakening selectivity and matriculation in fall 2023, she added. This is partly offset by stable retention, geographic diversity, and a diversifying student population due to growing graduate programs.
In fall of 2023, 45% of the school's students came from outside of
While the university's accrediting agency had put the university on probation in 2018 because of supplemental endowment draws, by 2019 it was rescinded as Loyola has achieved balanced operations and limited endowment draws through expense reductions, Barrett wrote.
The school benefits from "proactive budget planning to balance revenues and expenses to accommodate fluctuations in enrollment."
Its operating profile of running balanced budgets in recent years is offset by an "elevated maximum annual debt service burden." In the fiscal year that ended July 31, 2023, the school had a 9.7% MADS burden, compared to a 4.1% burden for S&P's median BBB-rated private college and university.
Barrett said the school's cash and investments remain strong at about 190% of operating expenses and 145% of debt as of summer 2023. Excluding bond proceeds, the percentages soften to 129% and 95%, respectively.
In December 2022, the school's board approved a $150 million fundraising campaign, to be completed in 2028, which has raised $54.8 million.
The university did not immediately respond to a Bond Buyer request for a comment.
Moody's Ratings rates the university Baa1 with a stable outlook. In a rating report released in January 2023, it cited credit strengths similar to those cited by S&P. For credit challenges, it said a "competitive student market limits pricing power," the school's debt leverage was "elevated relative to cash, margins and peers," and the university had "ongoing capital needs and elevated average age of plant."
The school has no connection to the three other universities in the nation with Loyola in their names.
The lowered outlook on Loyola University of New Orleans comes as many non-profit
