Dive Brief:

• Fitch Ratings hit Mount Saint Mary College with a credit downgrade this week, citing “multiple years of deterioration in financial assets stemming from declines in student enrollments.”
• The institution blamed a late 2022 cyberattack for an enrollment drop in 2023, according to Fitch. But analysts pointed to broader challenges at the New York-based private nonprofit, which draws heavily from surrounding regions, including the mid-Hudson, Long Island and New York City areas.
• “Longer-term enrollment trends reflect MSMC's very narrow geographic draw in a competitive and demographically challenged market, and weak student demand metrics,” Fitch analysts said in a Monday note.

Dive Insight:

Mount Saint Mary is heavily dependent on enrollment to fund itself. According to Fitch’s analysis, tuition and other fees from students make up about 85% of its operating revenues. The college is not unique in this respect, as numerous other smaller nonprofit institutions operate on thin margins and are facing financial pressure from enrollment declines.

That model makes enrollment drops painful. Fitch cited a full-time equivalent enrollment at Mount Saint Mary of around 1,383 students for fall 2023 — a 12% decline from fall 2022 and 30% decrease from fall 2019. 

Fitch analysts took the cyberattack into account and built a modest rebound into estimates. But they still downgraded Mount Saint Mary’s issuer rating from BBB+ to BBB, which still indicates a relatively low risk of default but is the last stop before speculative grade ratings.

Pointing to the college’s dependence on regional populations, the analysts noted, “The challenging market is characterized by weak demographics and high competition from multiple private and lower-cost public options.”

They also pointed out that the college’s enrollment has shrunk while its costs have not. In fiscal 2023, its operating expenses of $48.2 million were up nearly 8% from the year before, according to its latest financials. 

While revenue overall went up that year thanks to investment spending on operations, the college’s tuition and fee revenue declined by about 4.8%.

Mount Saint Mary owed about $46.6 million in bonds as of last June. A credit downgrade could raise its cost of borrowing in the future, though Fitch analysts note it has no further debt issuance planned currently. 

The college's max annual cost to service debt is estimated at $4.6 million for 2026, according to the rating agency. 

Analysts pointed to one bright spot: Mount Saint Mary’s nursing undergraduate and graduate nursing programs. The college’s leadership has said they are the only ones in some local counties, according to Fitch.

The Catholic college’s history stretches back to the mid-19th century. Along with recent enrollment and technological challenges, in 2016 its trustee board faced a no-confidence vote as some faculty worried about shared governance, board interference in personnel matters and a turn toward more conservative Catholic philosophy.