College will have approximately $331 million rated debt outstanding including the current offering
New York, May 02, 2013 --
Moody's Rating
Issue: Revenue Bonds, Series P; Rating: Aa1;
Sale Amount: $154,000,000; Expected Sale
Date: 05-15-2013; Rating Description: Revenue:
501c3 Unsecured General Obligation
Opinion
Moody's has assigned a Aa1 rating to approximately $154 million
fixed rate Series P bonds to be issued by the Massachusetts Development
Finance Agency on behalf of Williams College. At this time,
we have also affirmed the outstanding Aa1 and Aa1/VMIG 1 ratings and maintained
the stable outlook.
SUMMARY RATINGS RATIONALE
The Aa1 rating reflects Williams' superior market position as a
highly selective, small, private liberal arts college.
The college's financial resources provide multiple times coverage
of operations and debt and the college has a history of strong fundraising.
Offsetting these strengths are narrowing operating results, elevated
debt compared to cashflow and limited, albeit improved, liquidity
for its rating category.
The short-term VMIG 1 ratings reflect the college's strong
underlying credit as well as satisfactory liquidity, including the
college's own liquidity as well as two back-up bank facilities,
to pay bondholders in the event of a potential failed remarketing of the
college's variable rate demand obligations.
STRENGTHS
- Strong market position evidenced by low 16.5% freshmen
selectivity and strong 45.1% matriculation among those accepted
- Robust financial resources relative to operations with expendable
financial resources covering annual operations 7.26 times in fiscal
year 2012; expendable financial resources per FTE student is very
strong at $632,014
- Exemplary history of fundraising with over 60% of alumni
donating gifts in any given year and average annual gift revenue of over
$20 million from Fiscal Year (FY) 2010 through FY 2012, after
the conclusion of a $500 million fundraising campaign
CHALLENGES
- Double-digit cashflow is lower than in prior years and,
at 12.5% is relatively weak compared to most peers.
Leverage is high and average debt service coverage at 2.37 times
for the three years ended FY 2012 is also relatively weak.
- Relatively thin liquidity compared to small private colleges
rated in the top three rating categories with 475.3 monthly days
cash on hand and monthly liquidity to demand debt of 194.3%.
- High dependence on endowment draws, which represented nearly
half of operating revenue in FY 2012 highlighting the importance of strong
investment and liquidity management and oversight
Outlook
Moody's stable outlook incorporates our expectation that the college's
market position will remain strong demonstrated by consistently high student
demand and generation of gift revenue. It is also based on the
scheduled pay down of debt over the next two to three years prior to the
issuance of any additional bonds.
What Could Make the Rating Go Up
Significant increase in unrestricted liquidity compared to amount of demand
debt coupled with sustained improvement in operating performance,
reduction in debt, and balance sheet growth
What Could Make the Rating Go Down
Sustained weaker operating cash flow margins than peers and resulting
slower growth of financial resource base; significant increase in
debt without commensurate growth of expendable financial resources and
strong operations; narrowing liquidity compared to amount of outstanding
demand debt; failure to extend back-up bank facilities;
sustained deterioration of financial resources or student market position
METHODOLOGIES
The principal methodology used for this rating was US Not-for-Profit
Private and Public Higher Education published in August 2011. For
the Series I and J bonds, a secondary methodology used was Rating
Methodology for Municipal Bonds and Commercial Paper Supported by a Borrower's
Self-Liquidity published in January 2012. Please see the
Credit Policy page on www.moodys.com for a copy of these
methodologies.
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.
Edith Behr
VP - Senior Credit Officer
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
Eva Bogaty
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 assigns Aa1 rating to $154 million Williams College (MA) Series P Bonds to be issued by the Massachusetts Development Finance Agency and affirms outstanding Aa1 and Aa1/VMIG 1 ratings; outlook is stable