Debt downgrade for University of the Sciences

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The University of the Sciences is borrowing $61.8 million in the bond market to pay for a new dorm on its West Philadelphia campus.

Fitch Ratings downgraded the debt of the University of the Sciences of Philadelphia by one notch to BBB+, and Moody's Investors Services changed its outlook on the West Philadelphia institution to negative, keeping the rating at A3, one notch above the Fitch rating.

The ratings were prompted by the University of Sciences' plan to borrow $61.6 million to build a new on-campus dorm, increasing its debt 47 percent, to $191.5 million, according to Fitch. Moody's called that "an exceptionally high debt burden relative to operating revenue."

Maximum annual debt service will increase from $8.4 million to $11.4 million, which equates to 12 percent of 2016 revenue, Fitch said.

Valerie Weil, the school's chief financial and operating officer, said management was optimistic about the university's finances and was convinced that the $60 million dorm with 426 beds is needed to attract students.

"It was clear that this was something that was requested by our students. It's going to be a tremendous upgrade for our on-campus housing stock," she said.

Like many peer institutions in the Northeast, the University of the Sciences has faced persistent enrollment pressures and the number of 18-year-olds has declined.