Fitch Ratings has downgraded its rating to “BB” from “BBB” for $66.5 million of Upper Iowa University debt in the form of private college revenue bonds.
The Iowa Higher Education Loan Authority issued the bonds, series 2010 and 2012, on behalf of UIU. The bonds are general obligations of the university, payable from all legally available resources.
The 2012 bonds also are secured by a first mortgage lien on two dormitory buildings on the university’s main Fayette campus. Both issues have a debt service reserve fund.
Fitch downgraded its ratings on the bonds after UIU reported an $8.2 million operating deficit for the fiscal year that ended on June 30, 2013, which was much larger than expected. The university previously reported a fiscal year 2012 deficit of $1.9 million.
The downgrade also reflects other concerns, including continued operating stress in the current fiscal year as well as significant management turnover in the most recent fiscal year.
William Duffy became president of Upper Iowa University in April 2013. Duffy, formerly senior vice president for academic extension, succeeded Alan Walker, who resigned in early January.
Walker had led UIU since 2004. During his tenure, the university embarked on $75 million capital improvement project involved three new buildings on the Fayette campus.
Fitch also noted that a new chief financial officer started this month, the college has an interim provost, and a new director of admissions started in mid-2013.
Andrew Wenthe, UIU vice president for external affairs, said the new administrative team has been very proactive over the last six to nine months to address the issues illustrated by Fitch Ratings.
“Our focus continues to be on academic quality and services to our students,” Wenthe said. “Our faculty and staff are very committed to helping us move forward and face these challenges. We are pretty confident that our best days are ahead.”
Upper Iowa, founded in 1857, offers both undergraduate and graduate level programs at its residential Fayette campus, 20 educational extension centers in the Midwest, six international centers in two countries, and a distance education center. Total enrollment is about 6,000, including roughly 900 students on its main campus.
Wenthe said student retention at the Fayette campus has increased by double digits, with grown in some education centers and declines at other locations. He said the university has tightened its budget and taken steps to limit new employee and staff hires, except where it will affect academic quality and service.
“We have been operating for 157 years and there were a lot of time where we faced challenges,” Wenthe said. “We’re pretty confident moving forward.”