Moody’s downgrades Morehouse College credit rating

New Morehouse College president, Dr. John S. Wilson Jr., has his work cut out for him as Moody’s downgrades credit rating.

Morehouse College, the alma mater of Dr. Martin Luther King, Jr., has had is credit rating downgraded by Moody’s Investment Services from A3 to Baa1 – a rating that is just three spots above a rating of speculative.

The rating illustrates the divergence of credit risk among the institutions of higher learning in the state of Georgia and to a greater extent in the United States.

Changes in the revenue streams include dwindling government support for higher education and campus research, and spiraling tuition costs as students and parents question the return on investment of a college diploma or degree.

“The downgrade of Morehouse College’s rating to Baa1 and negative outlook is based on the college’s inability to achieve its targeted enrollment for fall 2012, further declines in financial resources and liquidity, thin unrestricted liquidity, negative operating margins, and weak cash flow and debt service coverage.”

Student enrollment to Morehouse College tends to be much smaller than that of market-leading universities. Moody’s determined that the school is struggling to meet enrollment targets; cash flow is thin, and uncertainty hangs over federal funding and philanthropic giving.

Morehouse College is ranked third on U.S. News’ sheet of historically black colleges and universities (HBCUs). The student body of more than 2,400 students paid tuition and fees of almost US$24,000 a year for the 2011-2012 academic year, according to U.S. News.

A copy of Moody’s report can be found here…