More Colleges Are Breaching Their Debt Requirements: S&P

A growing number of colleges are breaching bond and loan stipulations, known as covenants, that require them to stay within certain financial health parameters, according to a new report from S&P Global Ratings. The agency cited 12 colleges it rates that have breached covenants since last June. In most cases, bondholders waived the violation. Some covenants could allow debtholders to accelerate repayment, which could add to an institution’s liquidity and ratings risks. S&P downgraded ratings for about half the institutions with violations, typically because of underlying financial issues. “We see continued credit quality divergence in the U.S. higher education sector, with weaker-positioned institutions experiencing budgetary pressure and covenant violations,” the analysts said.