I’m writing to share some context for the story you may have seen in today’s media about one of our rating agencies having revised its outlook for Simmons from stable to negative.
There are a few important facts to understand about financial ratings and what they mean.
One Simmons is key to the future of Simmons and our ability to attract and retain students. As I reported at the Community Meeting yesterday, after years of deep analysis, careful consideration and thorough planning, the Board recently approved our financing plan for One Simmons.
The plan has always included borrowing money to cover the expenses associated with renovating our current space to create a new science center, to create “home” spaces for COCIS and CSSPP, to upgrade classroom spaces, and to relocate and centralize student services. All of these “enabling moves” pave the way for vacating the Park Science building so that we can build the new Living and Learning Center in the future.
Remember: the ground lease for the residential campus is projected to cover the cost of the new living and learning center. All of the borrowing we are doing now is for the enabling moves and renovations.
As is customary, we meet with our ratings agencies (Moody’s and S&P) to ensure they understand fully our financial plans. They typically issue two “scores,” if you will: a rating – which lenders use to evaluate the current credit worthiness of the University (for example, our ability to repay the new debt) and an outlook which lenders use to evaluate potential future credit worthiness.
The rating is more consequential to borrowing – and our rating did not change. With Moody’s the rating remains Baa1; with S&P it remains at BBB+.
With both agencies, our outlook was modified from “stable” to “negative,” which reflects their assessment that our rating has a greater likelihood of being downgraded in the next couple of years.
We’ve seen many universities who undertake large construction projects experience both a ratings downgrade and an outlook downgrade. With that in mind, we consider the news from the ratings agencies largely positive.
Most importantly, our banking partners share that view and we will be moving forward with our financing plans.In fact, one of our long-standing investment advisors who will handle the upcoming bond issuance for us, wrote in an email to me:
“We are just so delighted that the ratings held for [Simmons]! [We] discussed this remarkable development today and are both in awe at this accomplishment and how it sets us up for a successful pricing.”
While I would have preferred a more positive headline in this morning’s newspaper, I was happy to have the opportunity to share our commitment to the One Simmons project and our confidence in the future of Simmons.
I know the next couple of years will be especially challenging and inconvenient as we live through office moves and construction here on the academic campus. But to make progress toward our long-standing vision for a more efficient, modern and student-centered space -- in the heart of Boston – is a critical way to secure our future and will ultimately be gratifying to all.