Private university in Oregon upgraded as pandemic-related pressures ease

Fitch Ratings upgraded debt issued on behalf of the University of Portland in Oregon to A-plus from A, citing the easing of pandemic-related pressures.

The upgrade applies to $80 million of tax-exempt and taxable bonds issued in 2015 for the private Catholic university by state conduit issuer the Oregon Facilities Authority.

The bonds are secured by a lien on unrestricted gross revenues of the university.

The outlook is stable.

“With pandemic-related pressures easing, UP generated improved operating performance in fiscal 2021 and remains on budgetary target in fiscal 2022, despite some lingering enrollment and net tuition pressures,” Fitch analysts wrote Monday.

The upgrade for the university is in line with trends seen across higher education as students return to in-person learning and student housing vacancies drop.

In December, Fitch assigned a sector outlook of neutral to U.S. colleges and universities anticipating enrollment recovery, solid state budget prospects and good levels of budgetary flexibility, though it also said that higher education downgrades remained more likely than upgrades.

The liberal arts and sciences university, founded in 1901, is located on a 150-acre residential campus near downtown Portland.

The university has forecasted enrollment increases for 2022 based on the return to full campus activities as well as a shift in recruitment strategy, Fitch said.

It’s headcount enrollment fell by 6% in fall 2020 from 2019 as campus housing remained largely closed and instruction went online, according to Fitch. It also implemented cost-cutting measures that included furloughs.

The stable outlook reflects a reasonable expectation that the university’s enrollment and net tuition revenue will continue to stabilize or improve in fall 2022, Fitch said, following a modest 1% increase in enrollment in the 2021-22 academic year to 4,033.

The outlook also reflects the university’s “strong financial base and growing levels of available funds, which provide meaningful resilience through Fitch’s scenario analysis, and which are expected to be preserved in the context of no debt plans and manageable capital needs,” Fitch analysts wrote. “UP’s strengthened level of financial flexibility provides meaningful cushion against its currently weaker demand and enrollment characteristics.”

An upgrade to the AA category would “require significant improvement in enrollment and demand indicators, including materially stronger matriculation and a return to consistent net tuition revenue growth, all sustained over several years.”