Webster University’s bond rating falls further into junk status
A credit agency has downgraded Webster University’s bond rating, indicating the private college is at higher risk of defaulting on payments.
Moody’s downgraded Webster’s bond rating from Ba1 to Ba3 due to the university’s more than $100 million deficit and thinning financial reserves, according to the report. Webster took out over $60 million in bonds to pay for new high-tech buildings at its main campus in suburban Webster Groves.
Lisa Brown, Webster’s vice president and chief communications officer, said Moody’s downgrade doesn’t account for the university’s more recent gains in enrollment.
This rating adjustment reflects a snapshot in time of the university from May 2022 through May 2023 and does not include the significant progress we are seeing in both enrollment and revenue, Brown said in a statement.
Up until this fall, Webster experienced a 50% drop in enrollment and a deficit of $128 million over the past decade. But the university’s board of trustees continually awarded raises to its top leadership during the same period, making Chancellor Beth Stroble and President Julian Schuster among the highest-paid university leaders in the region. Webster last month announced Stroble would resign at the end of this year. She’s expected to return to the university to work in alumni relations and fundraising.
Webster’s financial and enrollment troubles mirror nationwide trends hitting higher education. There are fewer college-aged students, and a smaller percentage are going to college. That demographic cliff has increased competition and widened the gulf between small, struggling colleges and major established universities.
Fontbonne University, another local private college, is reviewing cuts to its academic programs and staffing levels as it faces a 60% decline in enrollment and a more than $14 million loss of revenue.
Webster has credited its new strategies of boosting international student enrollment and focusing on health and science, technology, engineer and mathematics programs of improving enrollment this fall. Brown said the university is expecting an additional $34 million in revenue due to those strategies.
Our commitment to meeting the needs of international students in the U.S. puts Webster University at the forefront of an important trend, Brown said in a statement.
Moody’s acknowledged Webster’s recent gains in enrollment and new strategies in its report, but it cautioned that Webster will continue to lose more money unless it cuts expenses.
Meanwhile, the university inched closer to a settlement involving its downtown St. Louis campus.
Webster was sued in federal court in September by the owner of the Arcade Building over allegations it did not pay rent for most of the year.
Last week, Webster’s attorney said in court filings that the university and the owner, an affiliate of Minneapolis-based Dominium Holdings, believe they have reached an agreement and sought additional time to draft and finalize the document.
Attorneys for Webster and Dominium did not respond to requests for comment.
