Steely Dan’s Old School Downgraded Further Into Junk by Moody’s

  • Bard College cut to B1 from Ba3 on rising debt, little cash
  • Waning donor support, reliance on debt could warrant more cuts

Steely Dan’s old school isn’t getting better with age, as Moody’s Investors Service cut Bard College credit rating further into junk given its increasing debt and depleting liquidity.

The two-man-band’s alma mater of 3,000 students, located 90 miles (145 kilometers) north of New York City in the Hudson River Valley, was cut to B1 -- four levels into speculative grade territory -- from Ba3, with a negative outlook. Bard has become increasingly dependent on operating lines of credit, even as it expects to have violated financial covenants in the bank agreements again for fiscal 2016, Moody’s analysts said in a report.

"With a cash flow from operations insufficient to cover debt service, prospects for a material increase in liquidity apart from collecting pledges receivable or benefiting from additional gifts remain slim," the analysts said.

Moody’s may upgrade the liberal arts institution should its liquidity improve and become less reliant on lines of credit. However, continued reliance on bank debt, failure to maintain access to lines of credit, or reduced donor support could lead the credit arbiter to cut Bard’s rating even further.

The 1973 song “My Old School” describes a police raid at Bard where Steely Dan co-founders Donald Fagen and Walter Becker were arrested as students. While charges were dropped, Fagen vowed never to return. He was later awarded an honorary degree by Bard.

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