Fitch Ratings Affirms Strong Issuer Credit Rating for Fayetteville State University

Effective leadership, steady enrollment, strong state support bolster financial outlook
Date: August 03, 2023

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Fayetteville, N.C. (August 03, 2023) — Fitch Ratings of New York has recently affirmed its 'A+' Issuer Default Rating (IDR) and the 'A' rating on Fayetteville State University’s (FSU) outstanding general revenue bonds (GRBs) issued by the University of North Carolina Board of Governors (BOG). At the same time, Fitch also affirmed the 'A-' rating on the university’s outstanding limited obligation bonds (student housing project) (LOBs) issued by Fayetteville State. Such ratings are a factor in interest rates when institutions and governments borrow money. This action further confirms the University’s improved fiscal stability and steady growth. Standard and Poor’s (S&P) Global Ratings recently upgraded FSU’s issuer credit rating (ICR) to A-.

“We continue to work closely with our partners in the UNC System and state government to further strengthen FSU’s financial foundation and fulfill our mission to offer a premier education to all who seek it, regardless of their circumstances,” said FSU Chancellor Darrell T. Allison, J.D. “Our efforts have vastly improved the university’s fiscal health and future stability, further ensuring our commitment to students today and tomorrow. Our upgraded rating, along with this recent affirmation, confirms our continued growth and strength.”

Fitch’s assessment pointed to FSU’s core strengths, particularly the stable state of North Carolina (AAA/Stable) operating appropriations (a significant 40.2% of operating revenues in fiscal 2022), and stable enrollment with a solid regional demand niche.

“FSU has navigated a challenging financial climate over the last several years — including the significant negative impact of the pandemic — through careful stewardship and strategic use of its resources while diligently managing its fiscal responsibilities,” said Lillian Wanjagi, Ed.D., FSU vice chancellor for business and finance and chief financial officer. “Those efforts have methodically and systematically buoyed the university’s credit outlook and bolstered its ability to provide a world-class education for North Carolinians, our military and beyond. Our recent S&P credit rating upgrade, combined with Fitch Ratings’ current affirmation, clearly indicates that we’re moving in the right direction.”

The IDR also reflects the university’s continued ability to meet its financial obligations and reduce its vulnerability to adverse conditions, thanks to strong state support. FSU has generally managed well regarding enrollment, even through the pandemic, due in large part to its affordability. Fitch identified key rating factors for FSU, including:

  • Strong, steady state financial support, including capital funding for major campus improvements and maintenance
  • Positive operating revenue margins
  • Expanded advancement initiatives
  • Modest, sustained enrollment growth that includes diverse student populations: traditional/residential, adult/non-traditional, military-affiliated, transfer and virtual learners

Fitch also pointed to recent strategic initiatives at FSU aimed at strengthening its academic opportunities and growing its footprint to support its strong rating:

  • Secured an historic $175 million state budget appropriation in 2021-22 to strengthen infrastructure and programs and rejuvenate the FSU campus. ·
  • Secured FSU’s participation in the NC Promise Tuition Plan, which leverages state dollars to subsidize the cost of tuition for all enrolled students and reduce college costs.

About Fitch Ratings

Fitch Ratings Inc. is an American credit rating agency and is one of the "Big Three credit rating agencies", the other two being Moody's and Standard & Poor's. It is one of the three nationally recognized statistical rating organizations designated by the U.S. Securities and Exchange Commission in 1975.

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