Standard & Poor’s raised DePaul University’s issuer credit rating by one notch to A in recognition of its strong operating performance and overall growth.
A stable outlook was assigned. “Factors supporting the higher rating include DePaul’s strong operating performance, investment liquidity, and management of enrollment and growth,” said analyst Jessica Lukas.
Enrollment growth may slow compared with prior years, but analysts don’t believe that will challenge the credit because of strong management controls and consistently positive operating margins.
The credit also benefits from the school’s strong progress in its fundraising efforts and it has no near-term new-money borrowing plans. DePaul’s fiscal 2012 expendable resources were equal to 70% of operating expenses and 125% of outstanding debt and leases while its debt service is equal to about 4.5% of 2012 operating expenses.
Challenges come from the school’s limited revenue diversity, with student-generated tuition and auxiliary fees accounting for more than 90% of operating revenues; an improving but still largely regional draw for students, with about 78% of undergraduate students from Illinois. DePaul also has a relatively small endowment of $349 million.
DePaul is one of the largest Catholic universities in the U.S. with its main campuses on Chicago’s north side and downtown. Satellite campuses are located in Naperville, Oak Forest, and near O’Hare International Airport.
Moody’s Investors Service affirmed the school’s A2 rating and stable outlook. The rating reviews come ahead of a $40 million refunding being sold through the Illinois Finance Authority. The school has $300 million of rated debt.
