S&P upgrades Vanderbilt University’s credit outlook to ‘positive’

Standard and Poor’s on Tuesday revised its credit outlook for Vanderbilt University to positive from the current stable position, based on the institution’s overall financial health following the April 2016 separation of the university and Vanderbilt University Medical Center.

The report cited the university’s extremely strong enterprise profile and strong financial profile as well as its “impressive” fundraising track record. Also noted in the report were the stable, experienced senior leadership team; strong student demand evidenced by Vanderbilt’s 11.7 percent admissions rate; the size of the endowment; and positive financial operations.

The global credit rating service also affirmed its AA ratings on Vanderbilt’s bonds and its A-1+ short-term rating on Vanderbilt’s commercial paper.

The report took note of Vanderbilt’s fundraising accomplishments, raising $174 million in fiscal year 2016 and boosting alumni participation to 25 percent. It also referred to the highly successful $1.94 billion Shape the Future campaign, which ended in 2011.

S&P’s change in the university’s credit outlook mirrors the improved outlook issued by Moody’s Investors Service in December 2015, when it revised the university’s outlook upward to positive. Moody’s also noted the VU-VUMC reorganization in its assessment.

The reorganization, completed on April 29, 2016, resulted in the university significantly reducing its debt while retaining the majority of the endowment. “The separation will result in Vanderbilt receiving substantially less revenue from health care operations, but the associated operating expenses and debt also decline significantly,” the S&P report said. In issuing the news, S&P noted that the university is potentially positioned for a higher rating in the future.