DePaul University ICR Raised to A by S&P

Standard & Poor's Ratings Services said it raised its issuer credit rating on DePaul University to A from A-minus, as well as the Illinois Finance Authority's series 2008, 2011A, and 2011B revenue bonds, issued on behalf of DePaul.

The outlook is stable.

At the same time, it assigned its A long-term rating to the Illinois Finance Authority's series 2013 revenue refunding bonds, issued on behalf of DePaul.

"Factors supporting the higher rating include DePaul's strong operating performance, investment liquidity, and management of enrollment and growth," said Standard & Poor's credit analyst Jessica Lukas, " and while we anticipate that enrollment growth may slow compared with prior years, we believe this is not a credit risk due to management controls we consider strong and consistently positive operating margins." We consider DePaul's strong fundraising progress and limited amount of additional debt plans as credit strengths.

The A rating reflects the university's: strong, consistent financial performance, with operating margins ranging from 6.2% to 12% of adjusted operating expenses in at least the past seven fiscal years and a surplus projected for the current, 2013 fiscal year; stable to modestly growing enrollment, with adequate demand metrics for the rating category; financial resource ratios that are adequate for the 'A' rating category -- DePaul's fiscal 2012 expendable resources were equal to 70% of operating expenses and 125% of outstanding debt and leases; manageable debt burden, with debt service equal to about 4.5% of 2012 operating expenses, no additional debt issuance expected for several years, and a conservative debt structure of fixed-rate serial maturities; and solid fundraising progress on the current capital campaign.

Offsetting credit factors include: limited revenue diversity, as student-generated tuition and auxiliary fees consistently constitute more than 90% of operating revenues; an improving but still largely regional draw for students, with about 78% of undergraduate students from Illinois and the Chicago metropolitan area; and a relatively small endowment given DePaul's age and size ($349 million at the end of fiscal 2012, about $16,290 per full-time equivalent (FTE) student.

DePaul is one of the largest Catholic universities in the U.S. in terms of FTE enrollment and operates two primary campuses in Chicago. It also has three smaller satellite campuses in Naperville, Oak Forest, and the O'Hare area of Chicago.

"The stable outlook reflects our anticipation that during the two-year outlook period, DePaul's strong operating performance on a full-accrual basis will continue, enrollment will be stable or grow modestly, demand metrics will remain stable or improve slightly relative to peer institutions, and financial resource ratios will continue to improve relative to the rating category," added Lukas.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER