S&P: Emory University, GA's 2016A-B Bonds Rated 'AA'
"We assessed Emory's enterprise profile as extremely strong, characterized by high selectivity and healthy demand for its academic programs," said S&P Global Ratings analyst Charlene Butterfield. "We assessed Emory's financial profile as strong, highlighted by maintenance of full accrual surpluses, and solid available resources." Combined, we believe these credit factors lead to an indicative stand-alone credit profile of 'aa-'. As our criteria indicate, the final rating can be within one notch of the indicative credit level. In our opinion, the 'AA' rating on the university's bonds better reflects Emory's available resources for compared with peers.
Emory's short-term 'A-1+' rating for its variable rate demand debt and CP is based on the university's self-liquidity. Total variable rate demand debt and CP as of June 30, 2016, was $521.4 million. Of the total amount, CP outstanding equaled $126.7 million as of the same date. The 'A-1+' rating reflects Emory's ability to meet optional and mandatory tenders under various interest-rate modes under a failed remarketing. Emory uses a combination of high-quality fixed-income investments and external bank facilities to provide purchase support for both its variable-rate demand bonds and CP. The university has an agreement with a bank that provides $150 million of liquidity support. Total self-liquidity support was $1.3 billion as of June 30, 2016.
A general obligation pledge secures all debt issued by the university. Management plans to use the series 2016A and 2016B proceeds to refund all or a portion of the series 2005A and 2008C, as well as a portion of outstanding commercial paper, and to fund a portion of the expansion and renovation of the Emory University Hospital flagship facility on the university's main campus, as well as fund costs of issuance.
The stable outlook reflects S&P Global Ratings' opinion that Emory's financial performance and available resources are in line with the rating and should remain so for at least the next two years. We expect student demand to remain at or near current levels, though subject to increasing competitive pressure.
We could consider a negative rating action during the next two years if operating performance weakens from current levels, or if available resources ratios diminish substantially from current pro forma levels.
We do not expect to raise the rating during the outlook period given Emory's plans for greater capital spending and additional debt reflected by the upcoming series 2016A and series 2016B bonds. We could consider a positive rating action beyond the outlook period if available resources improve dramatically and if operating performance strengthens considerably.
Emory University is a comprehensive research university with a wide array of undergraduate, graduate, and professional programs, with substantial health care operations. The university was founded in 1836 and is located in Atlanta, Ga.