The Maryland Health and Higher Educational Facilities Authority issued $40.2 million in bonds to finance capital improvements at an art school in Baltimore and refund previously issued securities.
The bonds mature between 2026 and 2047, yielding between 3.86% and 4.66%. They received a rating of BBB+ from Fitch Ratings, which assigned a negative outlook.
The authority will loan the bond proceeds to the Maryland Institute College of Art (MICA), a private art and design college in Baltimore.
The rating reflects MICA’s “relatively high dependence on student fee revenue with a small and volatile enrollment base in a very competitive market and narrow arts-focused curriculum,” Fitch analysts wrote.
They added that they had revised their outlook to negative from stable because “MICA’s enrollment, while showing signs of stabilization, will remain pressured heading into fall 2024 due to the lingering effects of larger graduating cohorts and limited potential for student revenue growth in MICA’s niche and competitive market.”
Declining enrollment can harm MICA’s bottom line; tuition and fees are the college’s largest source of revenue. The school had a headcount of 1,862 students as of last fall, according to the official statement accompanying the sale of the bonds. That is more than 16% less than fall 2019 levels.
The college has become less selective as enrollment drops. It accepted 78% of applicants for the 2023–24 academic year, compared to 62% in 2019–20, according to the bond documents.
MICA will use the proceeds to fund campus improvements. The issuance proceeds will also refund bonds that the Health and Higher Educational Facilities Authority sold on behalf of MICA in 2012.
The bonds are special obligations of the authority, payable by MICA revenue.
BofA Securities, Inc served as underwriter on the issuance, purchasing the bonds for $42.8 million. The price reflected a premium of $2.7 million. Callowhill Capital Advisors, LLC and PFM Financial Advisors LLC acted as municipal advisors.