Liberty University’s credit rating rises

November 20, 2013

Nonprofit universities are not businesses, despite all of the corporate-sounding talk these days about tuition revenue, admissions yield, enrollment management, cost-cutting, discounting and technological disruption.

And yet, even though they are not about profit, these institutions do crave approval from Wall Street. So Liberty University, founded in Lynchburg, Va., by the late television preacher the Rev. Jerry Falwell, celebrated a couple of months ago when its credit rating was upgraded.

Moody’s Investors Service on Sept. 9 moved Liberty to a rating of Aa3, from A1, in an analysis of $99 million in taxable bonds issued on behalf of Liberty in 2012.

“The upgrade reflects Liberty’s remarkable momentum in revenue growth and cash flow from operations,” Moody’s wrote. “This momentum, if continued, will produce sufficient cash to fund transformative capital investments as well as to build reserves over time. The growth in revenue and cash and investments makes Liberty a true outlier in Moody’s portfolio of not-for-profit universities.”

Over a four-year span from fiscal 2008 to fiscal 2012, Moody’s found, the operating revenue of the university grew 630 percent and its cash and investments rose 148 percent — “more than twice the growth of any other rated university on either measure.”

By contrast, many colleges and universities in that span have run into choppy financial waters. Some have had credit rating downgrades.

The finances of the evangelical Christian university are driven by its remarkable enrollment growth, especially in online education. As of last fall, the university enrolled more than 74,000 students, nearly 62,000 of them in online-focused programs. Those numbers make Liberty the largest university in Virginia and the largest private, nonprofit university in the country.

This week, Liberty made headlines for an incident that shook the school. A 19-year-old student was shot and killed early Tuesday after he attacked a campus police officer with a hammer in the lobby of a women’s dormitory, according to a police warrant. Liberty President Jerry Falwell Jr., the founder’s son, said the university was “deeply saddened by this tragic event.”

Nick Anderson covers higher education for The Washington Post. He has been a writer and editor at The Post since 2005.
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