A women's college with links to the University of Notre Dame is readying a deal to fund upgrades to its 175-year-old campus in a bid to reverse declining enrollment trends.
Saint Mary's College in South Bend, Indiana, sister school to Notre Dame, is pricing $42 million of bonds the week of Sept. 16 that will sell through St. Joseph County. About $27 million represents new money that will pay for the upgrades. The remaining proceeds will refund debt Saint Mary’s issued in 2010 and 2011. The college is using a forward delivery structure to refund the bonds.
Both the series 2019 and 2020 bonds will price in this month, but the series 2020 will be a forward refunding that will close in January 2020. The bonds are general obligations of the Catholic liberal arts college.
“The series 2019 bonds will play a key role in investing in significant campus improvements to enhance student attraction and experience,” the college said in an investor presentation. “The projects, which consist of general capital improvements throughout the campus, will impact the student experience and energy efficiency and sustainability.”
Wells Fargo Securities is the senior manager. Barnes & Thornburg LLP is bond counsel.
S&P Global Ratings affirmed the school's A-minus rating ahead of the sale. The outlook is stable. The college has $68 million in debt outstanding.
“We assessed SMC's enterprise profile as strong, characterized by its niche as a women's Catholic college and sister school of the University of Notre Dame, good geographic diversity, and healthy matriculation, offset by what we consider a small enrollment base — relative to those of higher-rated peers — that has had enrollment declines recently with another slight decline anticipated in fall 2019," said S&P Global Ratings analyst Sean Wiley.
The college recorded a $4.7 million deficit in fiscal 2018 driven by lower-than-anticipated enrollment. It has experienced a steady decrease in enrollment since 2015 and experienced a decline of nearly 5% in 2017. Another slight decline is expected for fall 2019 enrollment, S&P said.
“If the college can succeed in increasing enrollment while also limiting expense increases after fiscal 2020, it could lead to consistent full-accrual surpluses or break-even operations, which we would view positively, but this would likely be outside of our outlook period,” S&P said.
Saint Mary's has implemented a framework, centered on three strategic priorities, with the goal of increasing enrollment, revenue and resource efficiency. The plan includes improving its campus to be more attractive to students.
The college's board of trustees approved a plan in June to uphold the school’s highest health-safety standards, increase overall energy efficiency, and to make aesthetic enhancements for the students, faculty, staff and other community members who make use of the facilities.
“We began our efforts at the end of the spring semester and the campus has truly transformed over the summer, said Dana Strait, vice president for strategy and finance at Saint Mary's. “We are thankful to have a healthy endowment and a budget to support our campus’ rich history, maintain our high standards for students, and fulfill our commitment to energy efficiency and sustainability.”
The college is currently undergoing a national search for a new president.
Nancy Nekvasil has been acting as the college’s interim president since October 2018. Former president Janice Cervelli sued the college after her resignation. A confidentiality agreement and the ongoing litigation limits the amount the college can say in regard to the resignation; however, the college does not anticipate that the lawsuit would have any material impact on its financial condition.
