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Rating Action:

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

Global Credit Research - 02 May 2013

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
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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