Northern Illinois University wasn't alone in the bond-rating downgrades announced Friday afternoon by Moody's Investors Service. The ratings agency also downgraded the University of Illinois, Illinois State, Northeastern, and Southern Illinois University.
Moody's downgraded Northern Illinois University's rating on Auxiliary Facilities System Revenue Bonds (AFS) to Ba2 from Baa3 and the Certificates of Participation (COPs) rating to Ba3 from Ba1.
According to the news release, the downgrades reflect NIU's "materially weaker operations and likelihood of weakening liquidity as the university attempts to cope with the failure of the State of Illinois to enact a full-year budget since fiscal 2015."
The rating favorably incorporates NIU's position as one of the larger regional Illinois public universities with diverse academic offerings. According to the release, offsetting challenges include "comparatively high leverage and relatively modest financial reserves."
The negative outlook reflects the potential for further credit deterioration given NIU's exposure to continuing potential delays and reductions in state funding with limited alternative revenue growth potential. Absent state funding, deterioration of liquidity is highly likely.
Factors that Could Lead to an Upgrade:
- Resumption of steady and consistent state support contributing to improved operating performance
- Significant and sustained growth in liquidity
Factors that Could Lead to a Downgrade:
- Continuing decline in directly paid state operating support or "on-behalf" payments for pension and other post-retirement health benefits
- Inability to adjust further to changes in state funding
- Material declines in liquidity
- Continued enrollment and net tuition-revenue declines
