Yeshiva University’s financial turnaround will take years even if the school can correct longstanding fiscal mismanagement by its own leadership, according to a stark report from Moody’s Investor Services.
The ratings agency released the report on March 25 to explain the “rapid deterioration” of Y.U.’s credit rating, which has plunged from a high investment grade credit rating in 2008 deep into speculative grade this year.
The report cites poor financial oversight, extremely thin unrestricted liquidity and high reliance on external lines and banks for operations as key factors influencing the downgrades.
“Management’s unwillingness or inability to adjust the university’s strategic plan and business model, combined with weak financial reporting, led to six years of deficits,” Moody’s analyst Emily Schwarz wrote in the report.
“Until there is a clear turnaround plan in place, the university will continue to face challenges to restore fiscal stability and further deplete already minimal liquidity levels.”
Y.U. has operated at steep operating deficits, running into the tens of millions of dollars, for the past six years. In some years, the deficit has exceeded $100 million.
“The severity and long duration of Yeshiva’s operating deficits are primarily due to weak financial management and the board’s unwillingness or inability to act,” Schwarz reported.
Y.U. recently announced that it plans to sell ten apartment buildings near its Washington Heights campus.
The Moody’s report notes that such potential sales, plus other measures such as a voluntary retirement program, could help stabilize Y.U.’s finances. Though Y.U. runs the risk that such measures might harm the school’s reputation and donor support, Schwarz added.
A Moody’s spokesman said in an email that it is common for Moody’s to release such reports “for high profile credits and/or significant rating actions.”