DePaul University in Chicago won an upgrade from Moody's Investors Service Monday in recognition of its consistent positive operating performance and established student market.

Moody's raised its rating on DePaul's $304 million of debt issued through the Illinois Finance Authority to A2 from A3 and assigned a stable outlook.

The higher rating also reflects DePaul University's positive cash flow that provides ample coverage of future debt service, good liquidity, and positive indicators of governance and management.

The school's strengths are offset by a moderately high balance-sheet leverage and challenges associated with operating in a competitive market. The credit is also challenged by modest declines in the school's graduate and professional enrollment that pressure net tuition revenues. It also has limited revenue diversity and modest gift revenue despite an increase last year.

"The stable rating outlook reflects our expectation of continued favorable operating cash flow and debt service coverage, consistent net tuition growth, no near-term borrowing plans, and continued financial resource growth largely driven by operating surpluses and fundraising," analysts wrote.

DePaul saw a 17.4% operating cash flow margin in fiscal 2012 for a three-year average of 10.1% and benefits from unrestricted monthly liquidity of $515 million. All of its debt is in a fixed-rate mode.

The school has a well-established market position as the nation's largest Catholic university and one of the 10 largest private universities with more than 21,000 students.

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