May 3, 2023

Rider’s Bond Rating is Downgraded For the Third Time in Three Years

By Anne Levin

For the third time since 2020, Rider University’s bond rating has been downgraded by Moody’s Investor Service, citing the University’s $111 million in outstanding debt as of the end of fiscal year 2022.

“The downgrade of Rider University’s issuer rating to B2 from Ba3 is driven by the University’s ongoing multi-year deep deficit of operations, and rapidly deteriorating unrestricted liquidity, at just 22 monthly days cash on hand for fiscal 2022,” reads the April 5 report from Moody’s.

The action means the University still has a non-investment grade. Asked for comment, Rider’s Associate Vice President for University Marketing and Communications Kristine Brown said in an email on Monday that the announcement “reflects the reality that institutions like Rider University have been facing for years, such as challenging demographics and heightened competition. These financial concerns were only exacerbated by the pandemic, which unexpectedly drained our financial resources, bringing the situation to a critical point.”

Cited as a complicating issue is the ongoing uncertainty about the Princeton campus of Westminster Choir College, which Rider, which merged with the choral school in 1992, has been trying to unload since 2016.

“Governance considerations are also a key driver of this rating action, including financial strategies and risk management and management credibility and track record, given Rider’s continued inability to balance operations, enrollment strategies that have not yielded at least stabilized enrollment, and ongoing litigation involving the proposed sale of the Westminster Choir College campus in Princeton,” the Moody’s announcement reads.

Brown said the sale of the campus cannot move forward because of that litigation. “The lawsuit brought by the Princeton Theological Seminary in 2018 continues to be tied up in litigation, and as a result, the Princeton property has not been marketed for sale,” she said.

That suit, filed in New Jersey Superior Court, claims Rider’s attempt to sell Westminster goes against the school’s obligations to the Seminary and the conditions set by the original donor of the land in the 1930s, who stipulated that ownership of the land would move to the Seminary if Westminster ever ceased to operate as a choir college.

Rider was previously downgraded by Moody’s in April 2020 and July 2021. In an interview in The Rider News, the University’s Senior Vice President for Finance and Chief Financial Officer James Hartman said most universities of Rider’s size or larger have hundreds of millions of dollars in long-term debt.

“We’ve had some significant deficits in the last few years, but that’s all driven by the pandemic, and now we’re in a position where we’ve got a plan,” Hartman said. “We’re working on
finalizing a plan over the next three years to bring us back to a surplus budget again.”

Members of the Rider chapter of the American Association of University Professors (AAUP) see things differently. The chapter has twice voted no-confidence, and has called for the removal of Rider President Gregory Dell’Omo.

“This entire downgrading from Moody’s is just a stark condemnation of where Rider’s leadership, through the board and through President Dell’Omo, has taken us,” said professor and past AAUP chapter president Arthur Taylor, in The Rider News story.

Michael Brogan, another former AAUP chapter president, was quoted, “The most recent Moody’s report sends a clear message to the board of trustees, all of whom have successful careers in business, that Greg Dell’Omo needs to go. We need to seriously consider demanding the resignations of all administrators responsible for this situation.”

Brown said that since the launch of Rider’s strategic plan in 2017, the school has been “working urgently on an aggressive plan based
on enrollment growth and long-term financial stability with a commitment to institutional-wide transformation. Our efforts to right-size Rider’s operations, cut expenses and reallocate resources have only increased since the devastating effects of the pandemic.”

The size of the freshman class that enrolled last fall is a 17 percent increase from the previous year. For the class starting next fall, Rider is witnessing “historically high deposit rates at this point in time for both freshman and transfer students,” Brown said. “Overall, we feel confident about the path that we are on today, and the early, positive indications of this current enrollment cycle. Rider is an institution with many strengths that has endured for a very long time. We will continue to move forward with an aggressive plan to achieve financial stability with resources to invest in the priorities that support our mission of providing a high quality, affordable education.”