Affects $18.5 million of rated debt
New York, April 26, 2013 -- Moody's Investors Service has affirmed the Aa3 rating on Park Tudor Foundation's
Series 2005 and 2005B bonds issued through the Indiana Finance Authority.
The rating outlook remains stable.
SUMMARY RATING RATIONALE
The Aa3 rating reflects Park Tudor's established student market
position as a co-educational independent day school in Indianapolis,
Indiana, serving 994 students from preschool through the twelfth
grade. The rating also incorporates steady growth in tuition revenue,
stable operating performance, and low levels of outstanding debt.
Credit challenges include modest financial resources to support capital
investment and operations, low tuition rates, and limited
fundraising when compared to rated peers. The stable outlook reflects
Moody's anticipation of continued healthy student demand,
moderate growth in tuition revenues, and no additional borrowing
plans.
STRENGTHS
*Improved operating performance provides adequate support for operations.
The operating margin for fiscal year (FY) 2012 improved to 4.2%
compared to the 1.2% operating margin for FY 2009,
with the FY 2012 operating cash flow margin rising to 15.4%
in FY 2012 from 12.8% in FY 2009.
* Steady tuition growth, with the FY 2012 net tuition per student
at $14,247, a 7% increase over FY 2009.
*Modest outstanding debt levels ($18 million) with no future
borrowing plans. The school's FY 2012 expendable financial
resources of $70.8 million cushion debt by a solid 3.8
times.
*Established market position in the Indianapolis metropolitan area,
with stable selectivity (fall 2010 to fall 2012 average of 60%)
and matriculation (average of 78%) rates.
CHALLENGES
* Limited financial resource base, with FY 2012 cash and investments
totaling $85 million, well below Moody's independent
school FY 2011 Aa-median of $277 million and closer to the
2011 A-median of $74 million. Investment losses as
well as capital purchases in FY 2012 reduced cash and investments by $10
million from $94 million in FY 2011. A large debt service
payment due in FY 2014 places additional pressure on financial resources.
* Challenged investment profile resulting from weaker investment performance
relative to peers (-4.5% return for FY 2012) and
elevated hedge fund exposure for an entity of this size (over 25%
at the end of FY 2012).
*Weak fundraising ability: While average gifts per student have
grown to $2,373 in FY 2012 from $1,948 in FY
2009, gift revenue has fluctuated from year to year, and remains
well below the average for similarly rated independent schools.
OUTLOOK
The stable outlook reflects Moody's anticipation that Park Tudor
will maintain stable student demand, with ongoing positive operating
performance.
WHAT COULD MAKE THE RATING GO UP
Significant growth in financial resources, strong operating performance,
continued growth in net tuition revenues and net tuition per student,
and improved gift revenue.
WHAT COULD MAKE THE RATING GO DOWN
Continued decreases in cash and investments; deterioration in operating
performance resulting in weaker operating cash flow and debt service coverage;
decreases in net tuition revenues; weakened student demand reflected
in declining enrollment. Also, further capital spending or
debt issuance without strengthening balance sheet resources and liquidity.
PRINCIPAL RATING METHODOLOGY
The principal methodology used in this rating was US Independent Schools
Methodology published in February 2013. Please see the Credit Policy
page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Heidi Wilde
Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Mary Cooney
Asst Vice President - Analyst
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's affirms Park Tudor Foundation's (IN) Aa3 Rating; outlook remains stable