The Buffalo and Erie County Industrial Land Development Corporation issued $44.9 million in taxable bonds to finance the development of an osteopathic medical school at D’Youville University.
The bonds mature in 2030 and pay interest at 8.375%. They received a rating of BBB- from S&P Global Ratings, which downgraded the university from BBB.
The corporation will loan the bond proceeds to D’Youville, a private university in Buffalo, New York.
“The lower rating reflects our view of D’Youville’s weakened financial resource ratios, with a significant decline in cash and investments in recent years and increased debt to finance startup costs for a new osteopathic medicine program,” S&P analyst Megan Kearns said in a press release.
D’Youveville is one of many smaller colleges and universities that have seen their financial conditions worsen since the COVID-19 pandemic upended higher education. D’Youville, which enrolls 1,992 students, has seen the value of its total investments decrease by 22% over the past three years, according to the official statement accompanying the sale of the bonds. Enrollment has fallen by 17% since 2019, according to the bond documents.
The university is hoping that a new school of medicine will help reverse its financial woes. It will use the bond proceeds to fund development costs for a school of osteopathic medicine, for which it is currently seeking accreditation. D’Youville plans to open the school next year for 90 students to matriculate, but it doesn’t anticipate receiving accreditation until 2029.
This constitutes a bit of gamble for matriculating students. If the school doesn’t receive accreditation that year, when its first class is poised to graduate, the university will shutter the osteopathic program.
The bonds are limited obligations of the Buffalo and Erie County Industrial Land Development Corporation, secured by revenue D’Youville has pledged toward loan repayment.
Loop Capital Markets LLC served as underwriter on the issuance.