Moody’s, Standard and Poor’s, Upgrade Babson College Bond Rating

Strong student demand, positive operating performance cited

Babson has received bond rating upgrades from Moody’s Investors Service and Standard and Poor’s Ratings Services (S&P).

​ Standard and Poor's have upgraded Babson’s bond rating to A from the prior rating of A-. Highlighted reasons for their upgrade include:

  • Strong demand profile with a broad undergraduate geographical student draw and high quality students
  • Conservative management team maintaining solid levels of expendable resources compared to operating expenses and debt,
  • Commitment to managing costs, and
  • Achieved the goal of balancing the operating budget on a full accrual basis with positive results for the past 3 years.

Moody’s Investors Service has upgraded Babson College’s bond rating from A3 to A2 citing ongoing strong undergraduate student demand, trend of positive operating performance, and good fundraising, material growth in financial reserves, and improvement in liquidity.

“The stable outlook reflects our expectation that Babson will continue to maintain strong operating performance and a healthy financial resource cushion, despite the expectation of increased capital spending in coming years,” reported Moody’s.

Among the College’s Strengths:

  • Consistently strong operating margins (3 year average: 8.1%) reflect sound financial management
  • Improved financial flexibility due to retained surpluses, investment gains, and donor support, resulting in a 92% increase in expendable financial resources over last five years
  • Strong student demand reflected in the college's ability to consistently meet enrollment targets and accept only 28% of freshmen applications (admit rate)
  • Healthy liquidity with monthly liquidity covering over one year of operating expenses

According to Moody’s, “Babson's undergraduate programs in business and entrepreneurship continue to command solid demand which is reflected in the trend of increased applications, the college's ability to consistently meet enrollment targets, and a large number of accepted freshmen students who choose to enroll (29% yield rate). Strong student graduation rate of 90% (five years) and employment rate of 99% (six months after graduation), as reported by management, support the return on investment of a Babson education”

Finally, “healthy philanthropic support, muted capital spending, retained cash flows, and favorable investment returns have resulted in a significant improvement in Babson's cash and investments and financial resources.”

“We are pleased that after a thorough review, Moody’s has upgraded our rating,” said Katherine Craven, Chief Administrative Officer at Babson College. “The ability to borrow at competitive rates not only saves Babson money as we invest in priorities across our College, but also is a boost to our institutional reputation in the marketplace.”

About S&P

Standard & Poor’s and its predecessor organizations have been in business for more than 150 years. As one of the world's leading providers of independent credit risk research and benchmarks, we have approximately 1.2 million credit ratings outstanding on government, corporate, financial sector and structured finance entities and securities. In 2014 alone, we rated $4.3 trillion in new debt. And of all corporate sector “investment grade” ratings issued, just 1% have defaulted over the most recent five-year period. Ours is only one measure of risk, but it’s rooted in our long experience and deep conviction.

Moody’s Corporation

Moody's is an essential component of the global capital markets, providing credit ratings, research, tools, and analysis that contribute to transparent and integrated financial markets. Moody's Corporation (NYSE: MCO) is the parent company of Moody's Investors Service, which provides credit ratings and research covering debt instruments and securities, and Moody's Analytics, which offers leading-edge software, advisory services and research for credit and economic analysis and financial risk management. The Corporation, which reported revenue of $3.3 billion in 2014, employs approximately 10,000 people worldwide and maintains a presence in 33 countries.

About Babson College

Babson College is the educator, convener, and thought leader for Entrepreneurship of All Kinds​​​​​​​​​​​​​​®. The College is a dynamic living and learning laboratory, where students, faculty, and staff work together to address the real-world problems of business and society—while at the same time evolving our methods and advancing our programs. We shape the leaders our world needs most: those with strong functional knowledge and the skills and vision to navigate change, accommodate ambiguity, surmount complexity, and motivate teams in a common purpose to create economic and social value. As we have for nearly a half-century, Babson continues to advance Entrepreneurial Thought and Action​​​​​​​​​​​​​​​® as the most positive force on the planet for generating sustainable economic and social value.​​​​​​​​​​​​​​​​​​​​​​

By Brianna DiPietro, bdipietro@babson.edu, (781) 239-4548 | 7/23/2015 3:00 PM