Four years ago, Villanova Men’s basketball team won its second national championship, in dramatic style, with Kris Jenkins hitting a 3-point shot at the buzzer for the victory. The clip below never gets old:
It was a big win for the team and the school, and I am sure it raised the name recognition of Villanova across the country.
But who would have thought that winning such a championship would have helped the University’s credit rating with Moody’s, a firm that provides such a rating service? I know it was not the first thing I was thinking about when the ball went through the hoop.
Today in class I was talking about bonds, and I showed a write-up that Moody’s had prepared on a proposed bond issuance of $43 million by the University. Moody’s rated the bond issuance as A1, a strong credit rating.
Here were some of the strengths Moody’s highlighted:
- Established market position as a large Catholic comprehensive university with a national reputation and noted intercollegiate athletics.
- Strong financial oversight, yielding consistent cash flow generation in the 15% range and three-year (FY 2012-15) average debt service coverage of 3.9 times
- Strong fundraising bolstered by a $600 million comprehensive campaign
- Substantial and growing unrestricted liquidity, with 405 days cash on hand, affording good financial flexibility
Of course, it also highlighted some credit challenges:
- Heavy reliance on student charges, representing 81% of total operating revenue, could contribute to operating pressures in the event of softening student demand.
- Highly competitive student market, evidenced by constrained net tuition per student growth
- Narrowing of financial reserve cushion relative to debt and operations from recent large debt issuance and expected spending of $100 million
Later in the report, it highlighted a couple of recent developments and discussed the impact of such developments on the creditworthiness of the University:
- Villanova’s academic profile is further bolstered by the recent change of its “Carnegie Classification” classification to the Doctoral Universities category from the Master’s Colleges and Universities category. The university currently offers three doctoral programs, and is adding a fourth in Theology beginning in fall 2016. Overall, this recognition is favorable and underscores the continued strengthening of the university’s reputation and research profile.
- In April 2016, Villanova men’s basketball team won the NCAA national championship. The team’s success is credit positive, enhancing the university’s overall brand recognition and elevating its national profile. The widespread media coverage contributes to increased student demand and greater fundraising. The university reports that the team’s success will likely translate into added student demand for the fall 2017 incoming class.
So there it is. Our sports program is listed twice, both times as a strength. And look at that wording: the team’s success is credit positive. It does not get more obvious than that that. Winning the title had a favorable impact on our credit, which likely led to a more favorable interest rate for the University.
So while a successful sports team may have some obvious benefits like enhancing school spirit, increasing name recognition, and boosting alumni donations, it can also do wonders for your credit rating.
Now if only successful sports teams could lead to increased faculty wages…
*image from Bank Info Security