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Fitch/S&P Affirm Howard University’s Ratings; Outlooks Revised to Positive from Stable

Graduates of Howard University.

Thanks to historic philanthropic investment, prudent financial management, and strong demand for a Howard University education, the University’s 2022 bond rating outlooks are positive. 

National bond rating agency Standard & Poor’s revised its outlook for Howard to positive from stable and assigned its “BBB-” rating on Howard University’s $300 million series 2022A taxable bonds. The agency also affirmed the outstanding “BBB-” long-term and underlying ratings on the outstanding series 2011B, 2020A, 2020B and 2021A bonds. 

Fitch affirmed its bond rating and revised its outlook to positive, as well. They also assigned the same rating/outlook to the expected series 2022 issuance. 

The University’s record breaking fundraising and operating results, coupled with Fitch/S&P’s upgrades of their outlooks to positive, provide further proof that Howard University’s growing financial strength now mirrors its international brand of excellence.” 

Both ratings reports highlight increased philanthropy, the University’s strong enrollment numbers, and solid health care operations as points of great strength. 

“For our University to maximize the impact we have on the world, it is imperative that we continuously seek to improve our internal financial posture,” said Wayne A. I. Frederick, president of Howard University. “These positive Fitch and S&P ratings reflect the hard work we have put in over the past several years to improve the University’s finances and is a strong indicator of the direction we are headed as an institution.” 

An extraordinary year of philanthropy in support of Howard has ensured a bright future for the University, its students, faculty and staff. Generous donations made in recognition of Howard’s standing as a critical educator continue to drive new financial success. Howard University received $170 million in philanthropic investments and pledges in FY 2021.  

The University received the largest gift from a single donor in its history – $40 million – from philanthropist MacKenzie Scott in July 2020. The unsolicited, unrestricted funds will be used to support components of Howard’s five-year strategic plan, which will help students graduate on time, retain talented faculty, enhance our campus infrastructure, and support academic innovation and entrepreneurship. 

The list of generous gifts also includes $30 million for supporting journalism and communications students and establishing a new Center for Journalism and Democracy, made possible by donations from the Knight Foundation, John D. and Catherine T. MacArthur Foundation, Ford Foundation, and an anonymous donor. In addition, highly respected journalists Nikole Hannah-Jones and Ta-Nehisi Coates also joined Howard’s faculty.  

Howard University received a $5.4 million gift from Netflix in October, which specifically endowed full-tuition scholarships for fine arts students. Also, on October 20, Howard announced a $16.8 million grant from the PNC Foundation for a new entrepreneurship center. Both are restricted gifts, meaning the donation or grant can only be used for a specific purpose. 

“Philanthropy at Howard is at an all-time high. Never before in the history of our University have we seen so much interest from so many individuals who want to be a part of what we’re doing,” said David P. Bennett, senior vice president of development and alumni relations. “We look forward to cultivating more partnerships with alumni, friends, and corporate and foundation investors who share Howard’s values.” 

Fitch notes its 2022 IDR and bond rating “reflect strong and resilient demand characteristics (selectivity, student quality, retention) for undergraduate and professional programs as a leading Historically Black College and University (HBCU).” 

According to the S&P Global Ratings report published February 17, “The outlook revision reflects the University’s solid enrollment trend despite the pandemic, execution of some strategic initiatives, including program developments and identifying health care partnerships as well as improved operating performance and maintenance of a sufficient pro-forma balance sheet.” 

“The financial results of fiscal year 2021 were the successful culmination of several years of strategic investment and change for Howard University,” said Stephen Graham, Howard’s chief financial officer. “The University ended fiscal year 2021 with a change in net income from operations of $204 million leading to more than $1.1 billion in net assets, an increase of $437 million, for the first time in its prestigious history. The University’s record breaking fundraising and operating results, coupled with Fitch/S&P’s upgrades of their outlooks to positive, provide further proof that Howard University’s growing financial strength now mirrors its international brand of excellence.” 

Additionally, the S&P Global Ratings report cited the University’s revenue mix as a credit strength, adding “in our opinion with a mix of appropriations, tuition and student fees, and hospital and patient income as major contributors.”  

Howard touts numerous strengths, including the largest endowment of any HBCU, according to The Century Foundation.  

The S&P Global Ratings report further states, “Howard’s endowment had a market value of about $806 million as of June 30, 2021, equal to $78,101 per FTE, which is stronger than that of ‘BBB’ category peers.” The 2022 S&P report added Howard’s resources were improved from “historical levels due in part to fundraising, robust investment return, and an operating surplus” at the end of FY 2021. 

The improved ratings reflect the strength of a Howard education. The University continues to provide one of the best educational values to its students for both undergraduate, graduate and professional programs. 

“To achieve the seemingly impossible required the leadership team to be bold, to shoulder criticism, and execute jumps on the proverbial ladder to success, even when the rungs were missing,” said Frederick. “We made significant investments to improve the financial strength and standing of Howard University, including implementing the most significant compensation increases for faculty in recent history and the renovation of teaching and recreational spaces. With a strong and stable fiscal foundation and well-established relationships, we are in a better position to further invest in our campus and in our surrounding community. This next bond issue allows us to expand our impact. The outlook for Howard is incredibly bright.”