S&P: DePaul University, IL 2016A Bonds Assigned 'A' Rating; Other Ratings Affirmed
"We assessed DePaul's enterprise profile as strong," said S&P Global Ratings credit analyst Gauri Gupta, "characterized by broad program offerings with moderate demand, robust competition for students with pressure on enrollment, success under a recent fundraising campaign, and solid management policies and practices." We assessed DePaul's financial profile as strong, characterized by robust operating performance, good levels of investment liquidity, limited revenue diversity, rapid amortization of debt, and a modest endowment given the size of the university with available resources that are in line with the rating category. Enrollment has declined recently, but management has offset revenue declines with expense controls. While we anticipate that enrollment might continue to fall marginally, we believe management will continue to generate positive operating results.
"The rating reflects our view of the university's robust financial performance historically and moderate demand metrics for the rating category," said Ms. Gupta. Other factors include its:Available resource ratios that are in with the rating category;Modest debt burden, with pro forma maximum annual debt service (MADS) equal to about 4.8% of 2015 adjusted operating expenses and a conservative debt structure of fixed-rate serial maturities; Successful completion of a major comprehensive campaign; andProactive management that is attentive to financial metrics. We understand the DePaul intends to use the proceeds of the series 2016A revenue refunding bonds (about $115 million) to advance refund all of its series 2011A bonds. The fixed-rate bonds are a general obligation of the university on parity with existing rated debt. Total pro forma debt is about $333 million. All debt is fixed rate with serial maturities and a relatively front-loaded debt service amortization schedule. This provides some debt flexibility over time. The university has no swap agreements. We understand the DePaul does not currently intend to issue additional debt for about five years.
DePaul is the largest Catholic university in the U. S. in terms of full-time equivalent (FTE) enrollment and operates two primary campuses in Chicago. It also has two smaller satellite campuses in Naperville and the O'Hare area of Chicago. The university was established in 1898 and is now a major university offering 132 undergraduate and 183 graduate degree programs. In fall 2015, DePaul enrolled 23,539 students, consisting of about 68% undergraduate and 32% graduate students.
"The stable outlook reflects our anticipation that during the two-year outlook period, DePaul's positive operating performance on a full-accrual basis will continue, enrollment will be mostly stable, demand metrics will remain stable, and available resource ratios will remain in line with the rating category," added Ms. Gupta.