Paul L. Caron

Tuesday, February 12, 2019

Moody's Continues New York Law School's Negative Financial Outlook, Citing Its 26% Operating Deficit

New York Law School Logo (2019)New York Law Journal, New York Law School Still Faces Financial Challenges, Moody's Finds:

A national uptick in law school applicants wasn’t enough to prompt a key bond credit rating agency to reverse its negative outlook on New York Law School’s finances.

Moody’s Investors Service on Thursday affirmed the school’s Baa3 bond rating, which is the lowest rating for investment grade bonds and indicates that Moody’s believes the school’s bonds represent a moderate risk to investors. The Moody’s report assigned the law school a negative outlook, saying that the school’s spending of its financial reserves to cover operating shortfalls is “well above” the industry standard of 5 percent. The school’s bonds are valued at about $140 million.

“The rating also considers tuition pricing challenges and operating deficits that will continue for the foreseeable future, leading to a likely deterioration of spendable cash and investments,” reads the Moody’s report. “Despite an increase in the number of applications for law schools nationally, net tuition revenue remains pressured, resulting in a weak average operating deficit of 26 percent over the last three years.”

Law school spokeswoman Elizabeth Thomas said in a written statement Friday that the Moody’s rating reflects the schools “strong leadership team, focus on strategic planning, and recent successes amid a challenging environment for legal education. The rating also recognizes the high value of the school’s Tribeca campus and its large endowment,” she wrote.

Update:  Elizabeth Thomas noted that her comments in the NYLJ article reflected Moody's Ratings Rationale:

The Baa3 rating incorporates NYLS's robust unrestricted liquidity, marketable real estate in Manhattan, and strong leadership team focused on strategic planning. That planning has resulted in enrollment growth and reduced operating deficits. NYLS's unrestricted liquidity remains its key credit strength and provides it time to address its structural deficit. In fiscal 2018, the unrestricted monthly liquidity covered over 1,000 days of cash expenses.

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Why don't all the school's law profs and admins just use part of their million dollar premiums to pay off the enormous bond debt? *chuckle*

Posted by: Unemployed Northeastern | Feb 12, 2019 8:59:06 AM