The Rating Outlook is Stable.
The bonds are a general obligation of the university.
KEY RATING DRIVERS
STABLE CREDIT CHARACTERISTICS: The 'BBB-' rating reflects UST's good demand profile, benefitting from its demographically vibrant location; a track-record of generally positive GAAP-based financial performance; and a balance sheet cushion that has improved in recent years. Counterbalancing factors include a competitive operating environment, which limits UST's ability to grow net tuition revenue, its primary revenue stream, and a very high debt-burden.
GENERALLY FAVORABLE FINANCIAL PERFORMANCE: UST has registered positive GAAP-based financial performance in four out of the past five fiscal years, supported by periodic increases in student charges, a high but well-managed freshmen discounting rate, and careful expense management to-date. Based on interim data, UST may register negative GAAP-based performance in fiscal 2014; however, Fitch gains some comfort from the fact that a positive operating cash flow is still being anticipated.
STEADY ENROLLMENT TRENDS: Fall 2013 total headcount enrollment of 3,589 is 3.3% below fall 2012 but well within historical levels. A majority of the year-over-year decline in fall 2013 occurred within the Masters of Education (MED) programs, which appears to be experiencing a slowdown in demand following considerable growth in recent years. Fitch notes that enrollment declines within the MED programs appear to be relatively manageable from a budgetary perspective.
MANAGEABLE DEBT BURDEN: UST regularly generates a sufficient level of net income from operations to cover annual debt service and there are no additional debt plans. . The manageability of UST's debt burden is contingent on the successful refinancing of a real estate loan (the loan) coming due in fall 2015. Fitch notes positively that management has successfully refinanced the same loan in the past.
PRESSURED OPERATING PERFORMANCE: As UST's financial cushion relative to operating expenses remains light for the 'BBB' rating category, operational pressure could adversely impact the university's financial condition. An inability to appropriately adjust expenses in line with commensurate revenue growth, or lack thereof, would be viewed unfavorably.
UNSUCCESSFUL DEBT RESTRUCTURING: Inability to successfully manage the expiration of the loan obligation could strain the university's unencumbered financial resources, resulting in negative rating pressure.
Founded in 1947 by the Basilian Fathers, UST is the only
GENERALLY FAVORABLE FINANCIAL PERFORMANCE
In fiscal 2013 UST had a negative 3.5% operating margin, but when adjusted for endowment payout recorded a 0.9% margin. Overall, Fitch notes that the university's adjusted margin remains positive, but operating pressure is heightened.
Based on interim financials as of
IMPROVED BALANCE SHEET METRICS
Positive operating performance in tandem with favorable investment returns has driven meaningful growth in the UST's financial resources. As of
STEADY ENROLLMENT TRENDS
Undergraduate enrollment remained relatively stable through the fall 2013 at 1,609, which was slightly down from fall 2012's 1,625 (1% decline). Undergraduate enrollment was largely supported by a freshmen-to-sophomore retention rate of 78%, which is in line with historical levels over the past five years. Further, relative stability in undergraduate enrollment growth benefited from an uptick in the number of new transfer matriculants (183 in fall 2013 relative to 139 in fall 2012).
Graduate enrollment patterns exhibited some decline in fall 2013 as total graduate headcount fell to 1,883 from 1,954 in fall 2012. The decline was primarily located within the university's Masters of Education (MED) program, but Fitch notes that enrollment figures are now in line with historical trends as fall 2011 and fall 2012 had larger than normal enrollment patterns. Overall, Fitch views UST's total enrollment picture as steady, which is viewed favorably, especially as the university is located in a competitive service area in downtown
MANAGEABLE DEBT BURDEN
UST's maximum annual debt service (MADS) of approximately
As indicated in Fitch's prior credit reviews of UST, management plans to refinance the outstanding loan, which matures on
Additional information is available at 'www.fitchratings.com'.
--'U.S. College and University Rating Criteria'(
Source: Fitch Ratings
Most Popular Stories
- Obama Administration Releases Proposal to Regulate For-Profit Colleges
- Koch Brothers Step up Anti-Obamacare Campaign
- Elizabeth Vargas' Husband Marc Cohn Addresses Rumors
- Keurig Adds Peet's coffee, Alters Starbucks deal
- U.S. to Relinquish Gov't Control Over Internet
- Quiznos Files for Chapter 11
- SoCalGas Reaches Record Spend on Diversity Suppliers
- FDIC Sues Big Banks Over Rate Manipulation
- U.S. Consumer Sentiment Falls in Early March
- Vybz Kartel Convicted of Murder