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TMCNet:  Fitch Rates Mount Saint Mary College's (NY) Revs 'A-'; Outlook Stable

[November 16, 2012]

Fitch Rates Mount Saint Mary College's (NY) Revs 'A-'; Outlook Stable

NEW YORK --(Business Wire)--

Fitch Ratings assigns an 'A-' rating to the following series of bonds issued by the Orange (News - Alert) County Funding Corporation. The bonds are expected to sell via negotiation on Dec. 5, 2012. Proceeds of the 2012 A bonds will be used refinance an outstanding bank note and to renovate the Dominican Center, while proceeds of the 2012 B bonds will advance refund outstanding 2003 bonds.

--$22,000,000 tax-exempt revenue bonds (Mount Saint Mary College Project), series 2012A;

--$19,000,000 tax-exempt revenue bonds (Mount Saint Mary College Project), series 2012B.

Mount Saint Mary College (the college) will also be issuing approximately $26,000,000 of variable rate direct purchase bonds, series 2012C to restructure outstanding 2005 variable rate demand bonds. These bonds will not be rated and will be directly purchased by TD Bank.

Fitch affirms the rating on the college's outstanding series 2003 bonds issued by the Dormitory Authority of the State of New York.

The Rating Outlook is Stable.

SECURITY

The bonds are an unsecured obligation of the college, payable from all legally available funds.

KEY RATING DRIVERS

POSITIVE OPERATIONS: The college consistently generates strong positive operating margins which continue to result in healthy debt service coverage. However, while still strongly positive, the operating margin has declined in recent years.

CONCENTRATED REVENUE STREAM: Like many small private institutions, the college's revenues are derived primarily from student generated fees, which are further concentrated given that the majority of students are New York State residents.

SUFFICIENT LIQUIDITY RESOURCES: Growing level of available funds provides liquidity acceptable for the rating category.

CHALLENGING ENROLLMENT ENVIRONMENT: Enrollment has grown over the past few years, but saw a decline in fall 2012. There has been a shift in the historically strong program offerings, namely education, and management is reviewing all of its offerings in order to meet the changing landscape.

VARIABLE RATE EXPOSURE: The debt portfolio continues to have significant exposure to variable rate obligations; however, the mode is changing from a variable rate demand obligation to a direct bank purchased obligation, thereby lessening the risk renewal associated with standby liquidity facilities.

CREDIT PROFILE

Positive Operations

The cllege consistently produces a positive operating margin. From fiscal 2003 through fiscal 2011, the operating margin averaged 16.3%. Due to an increased level of student aid, in combination with weakened investment performance in recent years, the margin has declined. However, 2012 resulted in a still healthy 6.1%. Fitch views this healthy operating performance positively.

Like many small private institutions, the college is dependent on student generated revenues. Fitch views positively the fact that net tuition and fee revenues have continued to increase annually. These increases have been due to enrollment growth and increased tuition. The college's tuition level remains competitive within its peer group of regional private institutions.

Acceptable Liquidity

Available funds, defined as cash and investments not permanently restricted, reached $55 million in 2012, comparable to the fiscal 2011 balance. This level of funds equals approximately 102% of operating expenses and 76% of pro forma debt, down from 113% prior to debt issuance.

Increased Yet Manageable Debt Burden

The college's debt burden remains fairly high, 7.0%, and is expected to increase to 7.5% post issuance. However, concern is mitigated given that there are no additional debt plans anticipated over the next three to five years. In addition, given the strength of annual financial performance, Fitch does not expect this additional debt will affect the college's ability to cover debt carrying charges from operations.

Founded in 1959 by the Sisters of Saint Dominic of Newburgh, Mount Saint Mary College is a private independent liberal arts college, located in Newburgh, New York. The college is relatively small, with a total headcount enrollment of 2,547 in fall 2012. Approximately 81% of students are New York State residents, and over 50% of undergraduate students live on campus. The college offers 47 undergraduate programs, in addition to three master's programs in education, business and nursing.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings

Applicable Criteria and Related Research:

--'U.S. College and University Rating Criteria' (May 25, 2012);

--'Revenue-Supported Rating Criteria' (June 12, 2012);

--'Fitch Affirms Mount Saint Mary College's Outstanding Rev Bonds 'A-'; Outlook Stable' (Sept. 27, 2011).

Applicable Criteria and Related Research:

U.S. College and University Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=679152

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=681015

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.


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