Jim Collins, executive vice president and treasurer, said the upgrade will allow Clark to borrow at lower interest rates and to pay less for credit enhancement.
Positive operating performance, assets versus liabilities, conservative budgeting, relatively low debt in relation to the size of the endowment, and increases in both undergraduate and graduate enrollment helped make Clark’s case, according to the S&P report.
The report also cites this year’s dramatic 28 percent rise in applications, which has been attributable to a number of factors, including the adoption of an SAT/ACT test optional policy, a compelling public communications effort built upon the University’s LEEP (Liberal Education and Effective Practice) initiatives, the implementation of a full-tuition, room-and-board LEEP scholarship program for up to 10 new Clark students, and aggressive recruiting in new target areas across the United States and active engagement with college counselors at selected high schools.
Other peer institutions with A+ credit ratings include WPI, American University, Brandeis, Trinity, Rochester, Villanova and George Washington.
It’s unclear how much money the upgrade will save Clark over the long run, Collins said. At current interest rates, which are historically low, there would be little or no savings in the short term. But as interest rates rise over time “we could save a fair amount,” he said.
“Standard & Poor’s decision to upgrade our credit rating recognizes strong financial management, solid operating results, and the University’s success in growing enrollments and building our endowment,” said Clark University President David Angel. “Given that the overall outlook by the rating agencies for higher education is currently negative, this upgrade in our credit rating is especially notable. I want to recognize especially Jim Collins and [Vice President for Budgets and Planning] Andrea Michaels for their excellent stewardship and management of Clark’s financial resources that underlie this result.”
There had been some indication than an improved rating was coming. About two years ago Standard & Poor’s moved Clark into the “positive outlook” category, which meant that on its current track an upgrade was a clear possibility. “Right away I felt better about our chances,” Collins said.
“The stable outlook reflects our expectation that during the two-year outlook period the university will likely maintain strong financial resources relative to debt and expenses, sustain its demand metrics, and continue generating positive operating performance,” the report notes.
Collins cited the work of the nine-member Board of Trustees Investment Committee as critical to improving Clark’s standing with the ratings agency.
Clark’s last credit upgrade occurred in the spring of 2000, when it was bumped from an A- to an A. The University’s financial footing has improved dramatically since 1978 when it issued its first bonds — to build the Kneller Center — and was required to have collateral worth 120 percent of the cost because the school had no credit history. According Collins, Clark first borrowed on its own credit to begin construction on the Sackler Sciences Center and Carlson Hall in 1984.