Moody's Investors Service affirms Norwich University, VT

NEW YORK, May 19, 2004 -- Moody's Investors Service has affirmed the Baa1 rating on Norwich University's General Revenue Bonds. The outlook is stable. The rating affirmation affects Norwich's Series 1998 and 2003 bonds issued through the Vermont Educational and Health Buildings Financing Agency.

The Baa1 rating is based on the following credit factors:

  • Moody's believes that Norwich's balance sheet will continue to provide good coverage of debt and operations. Balance sheet strength is favorable with financial resources of $120 million, enhanced by the sale of the Vermont College asset in fiscal year 2002. Expendable resources currently provide a solid cushion for debt and operations at 2.22 times and 2.05 times respectively. Favorably, two-thirds of the University's resource base is expendable, providing significant financial flexibility. Moody's does not expect the University to take on major additional debt in the medium term. Instead, Norwich will rely on proceeds from fundraising of approximately $5 million annually and future capital campaigns to support strategic capital projects.

  • Moody's expects that Norwich will continue to improve its core market niche as a private undergraduate Senior Military University. Since the sale of the Vermont College campus in fiscal year 2002, Norwich University has refocused its efforts on its undergraduate programs, including strengthening the student quality of the engineering program and growing the corps of cadets. The University is looking to increase the number of cadets, who currently account for half of the University's 2,198 students. Norwich faces significant competition from both traditional institutions and other senior military colleges. The University has increased its tuition discounting to attract engineering students. However, while the increase in discount appears significant, rising to 38% in 2003 from 27.3% in 2001, this increase also incorporates the sale of the Vermont College, whose students received more modest discounting. Improvement of net tuition revenues and controls of tuition discounting levels will be essential to stabilize operating performance of the University.

  • Moody's expects fiscal imbalances to continue in the near term as management is engaged in several strategic initiatives to improve its market position. Due to investment in instruction and facilities as well as an effort to increase and diversify net revenue through the creation of an online program, Norwich continues to generate operating deficits. When held to an industry standard 5% average endowment spending rate on a rolling three years' cash and investments, Norwich's operating deficit measured -9.2% in fiscal year 2003. The operating imbalance has grown from - 2.5% in 2001, with a three year average margin of -6.2%. However, we expect this trend to reverse and to begin to see incremental improvement in operating performance in 2004 due to growth in new revenues and reduced spending for investment in programs. Additionally, the board has mandated balanced operations by 2007. We believe that Norwich University's healthy balance sheet profile provides it with some flexibility to withstand this period of operating volatility; however, improvement towards stabilization of operating performance will be an important future credit factor.


The stable outlook is based on Moody's expectation that Norwich's focus on its core traditional-aged market will better position it in the very competitive higher education market. While Moody's expects that the University will continue to experience operating pressures, we expect that the investment in new online programs will diversify the revenue stream and that incremental improvement in operating performance and net tuition per student will occur. The outlook is also based on an expectation that there will be no additional borrowing and that fundraising will contribute to financial resource growth.

KEY DATA AND RATIOS (Fiscal year 2003 financial data; fall 2003 enrollment data):

  • Total Enrollment: 2,198 full-time equivalent students
  • Selectivity Rate: 93%
  • Matriculation Rate: 34.4%
  • Total Debt: $41.5 million
  • Expendable Resources to Debt: 2.22 times
  • Expendable Resources to Operations: 2.05 times
  • Operating Margin: -9.2%
  • Three-year Average Operating Margin: -6.2%


Norwich University: Richard E. Rebmann, Chief Financial Officer and Treasurer, (802) 485-2041


  • Marianna Pisano, Analyst, Public Finance Group, Moody's Investors Service
  • Elizabeth C. Veasey, Backup Analyst, Public Finance Group, Moody's Investors Service


  • Journalists: (212) 553-0376
  • Research Clients: (212) 553-1653

Copyright 2004, Moody's Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc. (together, "MOODY'S"). All rights reserved.
May 2004

What's New | 2004 News Archive