SLIPPING AND SLIDING

Bethune-Cookman University’s credit rating has been on a downward trajectory for years and a recent laudatory press release of Jackson’s performances raises as many questions as it attempts to answer.

BY THE FLORIDA
COURIER STAFF

DAYTONA BEACH –  In an “Administrative Spotlight” email sent to Bethune-Cookman University (B-CU) stakeholders last week, the school’s president seemed to take a victory lap.

Years after construction of this dormitory on Bethune-Cookman University’s campus was funded, questions are still being asked about the details of its financing.
(CHARLES W. CHERRY II / FLORIDA COURIER)

The email, titled as “President Jackson Strengthens B-CU’s Financial Outlook,” stated the following:
“President Edison O. Jackson, in leading B-CU’s ascension to greatness, continues the implementation of his strategic vision that will ultimately lead to right-sizing the University instituting operational excellence at every level.”

New top administrators
The email advised readers of the appointment of two new key administrative leaders, Dr. Albert Mosley as chief operating officer (COO) and Angela Poole as chief financial officer (CFO).

“Over the past few months, the new COO, along with the CFO and other members of the President’s executive leadership team, have been engaged in a creative and strategic process aimed at curbing expenditures and maximizing potential sources of revenue,” it stated.

High turnover
What the email didn’t mention is that Poole was the fourth CFO at the school in less than two years. 

The email went on to downplay a December 2016 credit rating decrease that affects the school’s ability to get reasonably-priced loans.

“A recent initiative of the University includes focusing on its Fitch Rating. In December of 2016, the University experienced a slight downgrade of its bond rating A- to BBB. Principally, the change in rating was due to a lack of communication and a delay in providing operating information to Fitch Ratings.”

Actually, the “slight downgrade” was just the latest of a series of decreases that may make some of B-CU’s larger creditors nervous.

About Fitch
Fitch Ratings, Inc. is a credit rating agency that evaluated the creditworthiness of companies and institutions, including colleges and universities. But instead of numerical scores used in evaluating the ability of individuals to pay loans, Fitch uses letters, pluses and minuses.

A rating of AA+ is considered the best. It goes down from there: AA, AA−, A+, A, A−, BBB+, BBB, BBB−, BB, and so on.

As recently as September 2014, B-CU had an A+ rating. By December 2014, the rating was downgraded two notches to A-, and another two notches as of December 2016 to BBB.

Here’s why
The reasons for the downgrade were listed in a strongly worded report from Fitch dated Dec. 21, 2016.

“The downgrade to ‘BBB’ reflects weaker-than-expected fiscal 2015 financial results.
The June 30, 2015 audit (released in June 2016), shows that B-CU failed to meet projections of breakeven operations in fiscal 2015. In addition, an unexpected 5.3% enrollment decline in fall 2015 reflects increased volatility in B-CU’s student demand,” the report stated.

“A high level of turnover in the chief financial officer (CFO) position over the last 24 months raises concerns about the adequacy of B-CU’s governance and management practices and internal controls. B-CU has spoken with Fitch but has not provided adequate financial and operating information for fiscal 2016 and fall 2016, respectively.”

Fitch’s concerns mirror those of at least three former B-CU trustees, two of whom have sued the university because of its governance and management practices, as has been previously reported by the Florida Courier.

Losing money?
In two subparagraphs titled FISCAL 2015 RESULTS WEAKER THAN EXPECTED and ENROLLMENT CONCERNS, Fitch questions the school’s financial status.

“B-CU’s audited financial statements for the fiscal year ended June 30, 2015 were completed and released in June 2016. Fitch had expected a return at least to breakeven performance based on higher fall 2014 enrollment and discussions with management. However, the fiscal 2015 statements showed a continued operating deficit of at least 1.2% (as reported).

“Based on information from B-CU’s website, headcount enrollment fell by about 5.3% in fall 2015 to 3,831. Fitch had expected generally stable enrollment and continued healthy demand, which are necessary to maintain budgetary balance and to afford its large dormitory capital lease payments starting in fiscal 2017.”

Management criticized
Fitch also identified what it considered to be managerial insufficiencies at the university.

“Lack of continuity in financial management is evidenced by an inability to produce timely financial information, comply fully with its public disclosure requirements as covenanted with the sale of the 2010 bonds and provide timely responses to Fitch’s requests for information.

Specifically, B-CU has not provided fiscal 2016 financial statements (even in preliminary or draft form), fall 2016 enrollment figures, or detailed information about occupancy in the new dormitories or other campus housing.”

As a result, Fitch put B-CU on a type of reporting ‘probation,’ including the threat of downgrading its rating even more, until the proper financial information was submitted.

B-CU eventually suppled the requested information as was acknowledged by Fitch in a subsequent letter dated Jan. 27, 2017.

“B-CU has now provided the information cited in Fitch’s last rating action (audited fiscal 2016 financial statements, fall 2016 enrollment, and housing occupancy data),”  the  January letter reads. “…B-CU’s management team is working with Fitch to complete a full rating review including a management meeting and site visit.”

Such was the reason for Jackson’s self-congratulatory email, though admittedly there is still work to do.

“…President Jackson and his executive leadership team have been diligently working to strategically position the University so that curbing expenditures and maximizing revenue become the norm, and not simply a situatioknal (sic) response,” its last paragraph states.

Still, questions about B-CU’s management, governance, and financial stability remain.

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