NEW YORK, Dec. 23 /PRNewswire/ -- Standard & Poor's Ratings Services
placed its 'A+' underlying rating (SPUR) on the debt of the University of
Medicine and Dentistry of New Jersey on CreditWatch with negative
implications, following the university's acceptance of a monitor to oversee
its finances. The university accepted a monitor after the U.S. Attorney in
Newark announced that the university's board would be subject to criminal
prosecution for fraud if it refused to allow such a move. The SPUR on the
university's debt is currently 'A+'. This action affects only the SPUR on
approximately $500 million of debt. Standard & Poor's 'AAA' insured rating on
the university's debt is not affected by this action.
The university has been under investigation by the federal government for
much of 2005 tied to allegations that the university's hospital was improperly
billing for Medicaid and Medicare. More recently, concerns have arisen
regarding conflicts of interest on the board and damage or theft of documents
that might be related to the prosecutor's case.
Federal oversight of a public university's finances and governance is
unprecedented in the business of American higher education, and Standard &
Poor's believes that the rating may be soon lowered as a result of several
factors: damage to the university's reputation and diversion of management's
attention from the standard business of the institution; concerns about high
leverage and the possibility of additional debt to replace and modernize
facilities; additional unanticipated expenses and reduced revenues as a result
of such action; and low liquidity and breakeven operating performance.
Prior to this CreditWatch action, the outlook on the university's SPUR was
negative, reflecting Standard & Poor's concerns that increasing leverage would
place stress on the university's balance sheet and financial operations. The
university's debt has increased dramatically over the past few years, and
indications are that significant capital needs still remain. The 'A+' SPUR
has historically been supported by:
-- The university's role as the state's only provider of medical and
dental education;
-- Historically high amount of funding from New Jersey on a nominal basis;
-- Student demand, which provides admissions flexibility and a
comprehensive array of academic programs;
-- A growing sponsored research program; and
-- Historically stable financial performance across the university.
Standard & Poor's has not received audited financial statements for fiscal
2005, but earlier indications were that performance would be consistent with
fiscal 2004. The university last sold debt in late 2004, at which time the
'A+' SPUR was affirmed and the outlook revised to negative. At the last sale
of bonds in November 2004, the university's estimated debt was $745 million
compared with a much lower base of unrestricted net assets of $102 million at
June 30, 2004.
UMDNJ, in addition to medical education (the university runs one of the
largest education programs in the nation) and research, operates various
health care components including University Hospital in Newark. Of $1.16
billion of operating revenues in fiscal 2004, net patient services revenues
were $745.7 million, followed by professional services at $100.3 million.
State appropriations, on a nominal basis, make the university the second
highest recipient of state support and amounted to a sizable $331 million in
fiscal 2004. University Hospital is historically the largest single revenue
unit, with $597.7 million of revenues exceeding $592.8 million of expenditures
in fiscal 2004, for a net operating surplus of $4.9 million. University
Hospital operated 488-staffed beds in fiscal 2004 and had 137,347 patient days
and 78,616 emergency room visits. University Hospital has one of the most
challenging payer mixes of any hospital in New Jersey. The hospital also
serves as the Level 1 Trauma Center for northern New Jersey.
Standard & Poor's, a division of The McGraw-Hill Companies (NYSE: MHP), is
the world's foremost provider of independent credit ratings, indices, risk
evaluation, investment research and data. With approximately 6,300 employees
located in 20 countries and markets, Standard & Poor's is an essential part of
the world's financial infrastructure and has played a leading role for more
than 140 years in providing investors with the independent benchmarks they
need to feel more confident about their investment and financial decisions.
For more information, visit http://www.standardandpoors.com.
SOURCE Standard & Poor's
 back to top
Related links:
http://www.standardandpoors.com
CONTACT:
Media Contact: David Wargin, New York (1)
212-438-1579 david_wargin@standardandpoors.com Analyst Contacts:
Mary Peloquin-Dodd, New York (1) 212-438-2079 Stephen Infranco,
New York (1) 212-438-2025
|
