Moody’s Investors Service affirmed Hamilton’s Aa2 credit rating and favorably characterized its financial prospects according to a Feb. 27 press release from the College. The rating was first released in Moody’s annual outlook on higher education in the United States, released in Dec. 2018.
Moody’s Corporation provides credit ratings, research, and analysis for financial markets around the world; its Investors Service issues credit ratings and conducts research on debt and securities for industries and companies.
Hamilton’s rating is based on a global long-term scale that ranges from Aaa (the highest) to C (the lowest.) A high rating connotes high-quality, low-risk obligations (or money owed,) whereas a low rating describes obligations that are “typically in default, with little prospect for recovery of principal or interest,” according to the Moody’s website.
The College maintained its Aa2 rating from previous Moody’s reports. According to the press release, this assessment has remained stable despite increased spending on “financial aid, renovated and added new facilities, and improved programs.” The financial aid budget, in particular, grew from from $24.3 million in 2009–10 to approximately $44 million in 2018–19, an increase of over 80 percent.
Notably, the College’s stable rating and positive outlook are at odds with overall trends in higher education. In its report, Moody’s said, “The 2019 outlook for the U.S. higher education sector remains negative for the second consecutive year.” Hamilton was part of the 16 percent of private colleges and universities reviewed to receive an Aa2 rating.
According to the report, the key explanatory features of the College’s high rating were its “well established position as a selective liberal arts college drawing from a broad geographic, but highly competitive, area” and “strong wealth and liquidity providing an excellent buffer to operations and debt.”
Another factor was the launch of the $400 million “Because Hamilton” capital campaign, part of a continued fundraising effort amidst slowing revenue growth. Moody’s said the capital campaign will bolster the College’s “reserves” — most notably, an endowment of over $1 billion.The College’s financial management was praised as “reflecting prudent budgeting and cost containment” as “operations and cash flow generation” remain strong.
Moody’s further justified the Aa2 rating as reflecting its “expectations of the resumption of growth in net tuition revenue to allow for investment in new initiatives and facilities.”
College President David Wippman spoke optimistically of the report, saying, “Moody’s assessment of Hamilton’s creditworthiness affirms the College’s strong market position, prudent fiscal management, and substantial financial support from alumni, parents, and friends.
“Hamilton has traditionally made strategic investments in its programs, people, and facilities, while maintaining financial equilibrium. Moody’s rating provides external endorsement of our practices.”
