Investors Unfazed by Rider University’s Probation Status With Accreditor, Express Optimism About Management’s Turnaround Ability

Faculty layoffs, employee benefits reductions, probation by its accreditor. The private Rider University has attracted media attention in recent weeks as the school unveiled its turnaround efforts, called the “March to Sustainability Plan,” to the campus community and the broader public. The news, however, has not come as a surprise to the investor circle, which has been familiar with the university’s financial distress, sources told Octus. If anything, the ongoing wave of headlines in the public sphere may “accelerate the tough decisions the schools need to make,” they said.

Although the probation could lead to the school losing its accreditation, many schools in such situations are able to correct the issues found and move on, said Tamara Lowin, senior credit analyst at VanEck, of the probation decision announced on Oct. 30 by the Middle States Commission on Higher Education. The good news, Lowin noted, is that the probation status is “due to the weak financials of the university, a fact that bondholders are well acquainted with, as opposed to weaknesses in their academic program or governance.”

Other market sources echo Lowin’s sentiment, reiterating that although the news might have felt abrupt to students and faculty members, the accreditor’s action did not reflect anything new about Rider’s financial situation. Moreover, the accreditor’s surveillance cadence might not reflect the most up-to-date progress the school has made toward rightsizing, they said.

Certain of Rider’s bondholders cited the recent appointment of the current president John R. Loyack, who assumed office in July to guide the school out of financial trouble, as a crucial step in the right direction for the university. “Loyack has turned around two universities, and he has an eye for what needs to be done in actuality,” said a bondholder, adding that the president has made clear to bondholders that management is cognizant of the distress the university is in, and they are ready to make hard decisions. Prior to Rider, Loyack led the turnaround efforts at Alvernia University in Reading, Pa., and King’s College in Wilkes-Barre, Pa., both of which are also small private universities.

In addition, sources said Rider’s collateral package, which included a mortgage on a plot of land previously co-owned with the Princeton Theological Seminary, or PTS, in a good location in Lawrence Township, N.J., is a “healthy backstop” for a lower-credit-quality higher ed name. The Rider News reported in late September that Rider will receive $13 million from a July settlement with the PTS from the sale of the property, where Westminster Choir College once stood, to the Municipality of Princeton, which acquired the property in April for $42 million.

Rider is the obligor of $67 million in Series 2021A and Series 2021B bonds issued via the Public Finance Authority and $41.8 million in Series 2017F bonds issued via the New Jersey Educational Facilities Authority.

The 4% Series 2017F bonds have been trading in retail amounts since the beginning of the year, with the most recent trade today, Nov. 24, of $10,000 at roughly 60 to yield 8.466%, according to secondary trading data on EMMA. This was down from 75 to yield 6.4% in late October.

Rider University did not respond to a request for comment.