Moody’s Investor Service downgraded by two notches $85 million in University of Tulsa bonds, a move Moody’s says reflects a “very weak operating performance.”
The university has previously acknowledged cash flow problems and last year initiated a controversial reorganization that has met with notable resistance on campus and off.
The downgrade from Baa1 to Baa3 occurred last month, according to Moody’s. The outlook remains negative.
In a Dec. 19 campuswide email, President Gerard Clancy said the downgrade was not unexpected.
“While we are appropriately concerned about this downgrade, it is important that we all understand it will have minimal impact on our ability to borrow and should not be felt in our day-to-day operations,” he said.
According to Moody’s, all the university’s debt service reserve funds have been maintained at or above required levels, and it has substantial backup funding in place, including a reserve fund replenishment agreement with the J.A. Chapman and Leta M. Chapman trusts, which make up a substantial portion of TU’s endowment.
The problem, according to Moody’s, is that TU has been running unsustainable operating deficits.
“Operating cash flow has been insufficient to cover debt service over the fiscal 2015-2019 period,” the Moody’s report says.
TU says net tuition revenue declined by one-fourth from 2015 to 2019, even as enrollment remained largely the same. The decline was caused by the loss of just about all international students, who generally pay full tuition and housing costs, and greater tuition discounts because of competition for students.
Although not mentioned in the Moody’s report, critics of the administration and trustees also blame what they say is a top-heavy administration. They are also upset about elements of the reorganization that they believe damages TU’s academic reputation and will ultimately worsen its financial difficulties.
Clancy, in his campus email, said the school has made progress on the financial front but that “we must all pull together and find ways to enhance our financial standing through responsible cost reductions.”