Hartford Business Journal

20 HARTFORDBUSINESS.COM | APRIL 3, 2023 In 2019, UHart tapped $132 million in bond funds to refinance existing debt and fund construction of the 60,000-square-foot Francis X. and Nancy Hursey Center for Advanced Engineering and Health Professions (shown above). PHOTO | CONTRIBUTED Higher-Ed Headwinds University of Hartford retains financial consultant after breaching loan agreement By Michael Puffer and Greg Bordonaro mpuffer@hartfordbusiness.com T he University of Hartford has hired an independent advi- sory firm to recommend ways to shore up its financial position, after failing to meet the debt service coverage ratio required for over $100 million in bonds used for campus improvements and other purposes. The violation of the debt service ratio — a key measure of an orga- nization's ability to repay loans — came to light in January, after the school discovered an accounting error in financial disclosure forms it provided to investors ahead of a separate $25.5 million bond offering last summer. Those funds — tapped through the Connecticut Health and Educational Facilities Authority, a quasi-public state agency that provides access to tax-free financing for nonprofit colleges, hospitals and other organi- zations — are being used for student housing renovations, the construction of a new health and wellness center and the pending build-out of a new track and field facility, records show. UHart submitted corrections to its preliminary and official bond offering statements on Jan. 18, after discov- ering it initially underreported $10.8 million in expenses. Such statements are published ahead of a bond issuance to help investors evaluate the structure and credit quality of a deal. They typically outline the purpose and terms of the bond offering and financial status of the issuer, among other things. The school also had to restate and amend its 2022 annual report, which outlines several challenges, including a multiyear slide in enrollment and a five-year string of operating losses that peaked at $17.1 million in fiscal 2022. More significantly, the updated calculations, which were based on audited financial statements, showed the school failing to meet its required debt coverage ratio — a measure that helps demonstrate how much operating profits, or cash flow, an organization has to cover annual debt payments. UHart's debt coverage ratio fell below the 1.1 level required under a $132-million bond deal issued in 2019. As a result, UHart had to retain an independent financial consultant — Longhouse Capital Advisors — to get back into compliance. Longhouse is expected to issue recommendations soon. As long as UHart follows those suggestions — "to the extent permitted by law, charter, by-laws or contract" — and maintains a debt coverage ratio of at least 1 moving forward, it will be deemed in compliance with its loan agreement, records show. A future debt coverage ratio below 1 will be deemed a default, records show. Navigating headwinds UHart officials declined to be interviewed for this story, but issued a detailed statement saying they remain confident in the university's overall fiscal health, budget planning processes and trajectory. UHart said it's current on all debt interest and principal payments, as well as all other financial obligations. The school said it also has a "strong" $175 million endowment and an untapped $15 million revolving credit line with JPMorgan Chase. "The University will continue to manage our financial position and operations closely to ensure compli- ance with all financial ratios in the future," UHart said. The school also acknowledged it is navigating headwinds shared by many colleges, including pandemic recovery, increased competition and inflation. "The University has two smaller classes due to the pandemic that will be here for the remainder of their four-year educational experience, which reduces tuition and room and board revenues," UHart said. "Like many of our peers in the state and across the country, these factors contributed to an operating deficit for the fiscal year ending June 30, 2022." Meantime, UHart said the indi- vidual responsible for the accounting error "is no longer" employed by the university and its finance department has new leadership. The miscalculation was the result of the school using its budgeted expenses, rather than year-to-date actual expenses that were available when the 2022 bond offering state- ments were published last summer, the university said. About five weeks after notifying investors of the corrections, the school announced in February that President Gregory Woodward would be retiring in June, capping off six years as the institution's leader. UHart in March also named a

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