Note: Content provided by Moody’s Investors Service. Also published at https://www.moodys.com/research/docid–PR_908963752.
Moody’s Ratings (Moody’s) has affirmed Linfield University’s (OR) Baa3 issuer and revenue bond ratings. The university had approximately $47 million debt outstanding as of Jun 30, 2024. The outlook is stable.
Ratings rationale
The Baa3 issuer rating reflects the university’s good brand and strategic positioning despite ongoing student market challenges resulting in generally flat net tuition revenue and continued operating deficits expected through at least FY 2026. The highly competitive Northwest student market will continue to pressure operating results; EBIDA in FY24 declined to 10.2% and debt service coverage fell to an adequate 1.4x. Linfield remains reliant on student charges, which typically account for over 75% of operating revenue. Management’s ability to execute budget adjustments, including identified expense reductions, will be important to limiting further weakening in operating performance as it implements its strategic enrollment and programmatic initiatives. Total cash and investments provide some financial flexibility and in fiscal 2024 provided a good 2.0x coverage to operating expenses. The university’s manageable debt is conservatively structured with all fixed rate and amortizing bonds.
The Baa3 revenue bond rating incorporates the credit characteristics of the Baa3 issuer rating and the general obligation pledge of the payment obligation.
Ratings outlook
The stable outlook reflects Moody’s expectations that operating deficits will continue through at least fiscal 2026, but that financial reserves and liquidity will continue to provide a cushion as management works through a difficult operating revenue environment. It incorporates no material change in the university’s leverage profile, including no new debt plans.
Factors that could lead to an upgrade of the ratings
- Stronger market position highlighted by growth in enrollment and sustained net tuition growth
- Sustained improvement in EBIDA margins and healthy debt service coverage
- Strengthened wealth and liquidity relative to debt and operations
Factors that could lead to a downgrade of the rankings
- Material reduction in unrestricted liquidity or financial reserves
- Further erosion of EBIDA margins and debt service coverage
- Weakened student demand reflected in declines to enrollment and net tuition revenue
Profile
Linfield University is a small private university with campuses in Willamette Valley and the City of Portland, Oregon, and Continuing Education division for online students. The main campus in McMinnville is primarily undergraduate students and is focused on liberal arts and preprofessional programs. The Portland campus houses the Linfield-Good Samaritan School of Nursing, which offers bachelor’s and master’s degree nursing programs. Linfield recorded Moody’s adjusted operating revenue of $68 million in fiscal 2024, and in fall 2024, enrolled 1,635 full-time equivalent (FTE) students.
