AMU Divesting Nicaragua Campus; Announces Favorable Bond Rating from S&P
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Published on Thursday, 09 May 2013 15:08
Ave Maria University has announced two developments that will have a significant impact on the school's finances and operations. AMU is divesting its Latin American campus and also announced it has received an investment-grade bond rating from Standard & Poor's that will let the school save "millions" through a bond offering that would consolidate its debt .
AMU President Jim Towey said in an announcement to staff and faculty Thursday morning that the school has signed a letter of intent with Keiser University, a private non-profit university based in Fort Lauderdale, to transfer ownership of the AMU Latin American campus effective July 1.
"As we worked through the strategic plan, we determined that the Nicaragua campus was not key to the mission of the university," Mr. Towey said in an interview. "The board of trustees had deficit fatigue," he said, noting that the Latin America campus had lost more than $7 million since Ave Maria College – AMU's forerunner – acquired it in 2000 from the University of Mobile.
A final agreement has not yet been signed, Mr. Towey said, but "all indications are that will happen."
A statement from the Latin American campus said that "to the degree possible, Keiser University will continue to respond to the spiritual needs and Catholic traditions of the students." Almost 800 students have graduated from the Latin American campus, the Nicaragua administration said in a statement.
The transfer of ownership requires the approval of the Southern Conference of Colleges and Schools (SACS). Both Keiser and AMU are accredited by SACS.
Ave Maria University also announced that bonds it intends to issue have received an investment-grade BBB- rating from Standard and Poor's, which reviewed the school's finances in detail and called its "outlook stable."
S&P credit analyst Carolyn McLean said in a statement that the rating of the bonds as investment grade, is a reflection of the agency's opinion that "management's plan to mature and stabilize operations will be realized over the next few years as the university builds its cash and liquid investment position."
S&P rates bonds from its highest AAA designation to D, with BBB- being the lowest investment grade.
Factors limiting the rating, S&P said, included a relatively short operating history, a limited cash cushion, a high debt burden and a reliance on land sales to fund endowment growth.
Mr. Towey said in an email to AMU faculty and staff that rating by S&P "confirms that Ave Maria is no longer a 'startup' but is, in fact, operating as a going concern without dependence upon our generous founder, Tom Monaghan." The rating agency was aware, Mr. Towey said in an interview, that Mr. Monaghan's funding commitment to Ave Maria – around $3 million this year – will end in June, 2014.
The debt rating will enable AMU to refinance about $60 million in debt in a "financially advantageous" way that Mr. Towey said would save the school millions of dollars.
AMU has started discussions with underwriters and Mr. Towey said he hopes the bonds will be offered in July.
Mr. Towey also said that he has agreed to a new three-year contract effective July 1 to serve as president of the institution. The board offered the extension, he said, "and I was happy to re-up."
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The Ave Herald sat down with Mr. Towey for a lengthy interview on the state of the university, and a more detailed story on that discussion will be published in the next few days.
