S&P affirms HCC’s credit rating on strength of finances and management
Apr 7, 2020
Yesterday, S&P Global Ratings (S&P), a leading national credit rating agency, called the financial outlook for Houston Community College (HCC) stable and affirmed HCC’s credit rating on its revenue bonds at ‘AA-.’
According to a statement from S&P, the rating affirmation was based primarily on HCC’s strong liquidity position, manageable debt, diverse revenue base and experienced management team. The rating affirmation is particularly notable since it comes in the midst of growing economic uncertainty and an increasing focus by the rating agencies on the ability of the local government and higher education sectors to weather the financial impact of the COVID-19 pandemic.
According to S&P’s report, the stable outlook reflects S&P’s view that HCC's ”very strong liquidity position will enable the system to maintain its sound financial position over the next two years.”
S&P also maintains an AA+ rating on HCC’s general obligation bonds.
S&P assigned its 'AA-' long-term rating to HCC’s series 2020 combined fee revenue refunding bonds (estimated par amount of $16 million) which will be issued to refinance certain outstanding bonds at a lower interest rate to generate interest cost savings for HCC. S&P Global Ratings also affirmed its 'AA-' rating on HCC's existing senior-lien revenue bonds and its 'A+' rating on the college's existing junior-lien revenue bonds.
“Over the last several years, HCC leadership has worked closely with our Board of Trustees to ensure we have a solid financial position, and we have always tried to be forward-thinking in our ability to meet our financial obligations,” said HCC Chancellor Dr. Cesar Maldonado. “It is not surprising that S&P would acknowledge those ongoing efforts. But, coming as this reaffirmed rating does, during this tumultuous time, will be extremely helpful as we navigate this new normal.”
In issuing its rating today, S&P stated, “The rating reflects our opinion of the system's sound financial resources, which are supported by very strong liquidity at more than 180 days cash on hand at year-end fiscal 2019, manageable revenue debt relative to HCCS' adjusted unrestricted net assets (UNA), and a diverse revenue base with significant ability to adjust rates, if needed. Despite these strengths, we recognize there remains some uncertainty regarding how future enrollment and subsequent financials might react to changes that develop as a result of the COVID-19 outbreak….The experienced management team, however, is already in the process of updating its budget scenarios to ensure balanced operations, which we believe is key to the overall stability of the rating.”