UNIVERSITY HAS $751.8 MILLION OF RATED DEBT
New York, December 07, 2011 -- Moody's has affirmed University of Miami's (UM) A3 debt rating and
stable outlook. The University has approximately $751.8
million of rated debt as detailed at the end of this report. The
outlook is stable.
SUMMARY RATING RATIONALE:
The A3 rating reflects the University's healthy student market as
a comprehensive private research university located in South Florida with
strong fundraising and a largely fixed rate debt structure. These
credit strengths are offset by challenges including significant healthcare
exposure (3 owned hospitals, outpatient centers, and a large
faculty practice plan), thin liquidity relative to expense base,
and a large unfunded pension liability.
STRENGTHS
*UM maintains a healthy student market position and research profile
as an urban comprehensive university, with 15,357 full-time
equivalent students enrolled in fall 2011 (approximately two-thirds
undergraduate) and nearly $230 million of research expenses in
FY 2011 (per audit). Net tuition per student is high at $26,763
in FY 2011, partly attributable to the sizeable graduate and professional
student population.
*The majority of University of Miami's debt is fixed-rate (all
debt except for operating line of credit which had $15.9
million outstanding in FY 2011).
*UM continues to demonstrate very strong fundraising success,
with $104.5 million of average annual gift revenue in FY's
2009-2011.
*Slowed capital and borrowing plans in recent years in response to
the challenged economy. The University's last issuance of
long-term debt was in 2008 (to purchase a hospital). The
$824.3 million of debt in FY 2011 represents a 5%
decrease over FY 2009 direct debt, and the University's operating
leverage is low with 35% debt-to-revenue in FY 2011.
CHALLENGES
*UM has significant health care exposure, with ownership of
three hospitals including University of Miami Hospital which was purchased
in December 2007 as well as a large faculty practice plan (over 900 physicians).
The University's exposure to Jackson Memorial Hospital, a
financially-struggling Miami-Dade County owned hospital,
is a serious credit concern which we will continue to monitor closely.
In FY 2011, consolidated patient care-related revenues represent
approximately half of all of the University's operating revenue.
*UM's financial resources provide thin coverage of a very large
expense base ($2.3 billion of expenses in FY 2011).
In FY 2011, the ratio of expendable financial resources to operations
is modest at 0.17 times, and unrestricted monthly liquidity
of $607 million would provide 101 days cash on hand.
*Although the University's defined benefit pension plan was
closed to new participants in 2007, the unfunded obligation remains
large, partly due to past investment losses and a lower discount
rate. A small number of higher education institutions have defined
benefit pension plans, with most pension plans structured as defined
contribution plans.
*The University's consolidated operating performance has tightened
over the past five years and exposure to healthcare-related operations
has increased with the hospital acquisition. In FY 2011,
the University generated a 1.1% operating margin and 8.2%
operating cash flow margin (compared to a 4.1% operating
margin and 10.3% cash flow margin in FY 2007 by Moody's
calculation).
Outlook
The stable outlook is based on our expectation that UM maintain a healthy
student market and strong fundraising. We expect operating performance
to continue to strengthen, in particular reflecting management's
focus on longer-term targets for health care operations improvement.
WOULD MAKE THE RATING GO UP
Significant growth of unrestricted liquidity coupled with improved operating
cash flow and maintenance of strong student market and research positions
WHAT COULD MAKE THE RATING GO DOWN
Significant additional borrowing absent growth of financial resources
and cash flow to cover new debt service; material reduction in liquidity
or cash flow levels; material weakening of UM's healthcare
operations
The principal methodology used in this rating was U.S. Not-for-Profit
Private and Public Higher Education published in August 2011. Please
see the Credit Policy page on www.moodys.com for a copy
of this methodology.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country
which has not been recognized as endorsable at this date, this credit
rating is deemed "EU qualified by extension" and may still
be used by financial institutions for regulatory purposes until 31 January
2012. ESMA may extend the use of credit ratings for regulatory
purposes in the European Community for three additional months,
until 30 April 2012, if ESMA decides that exceptional circumstances
arise that may imply potential market disruption or financial instability.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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.
Information sources used to prepare the rating are the following:
parties involved in the ratings, and public information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
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information received in the rating process.
Please see Moody's Rating Symbols and Definitions on the Rating
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recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
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Consequently, Moody's provides a date that it believes is
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for further information.
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.
Kimberly S. Tuby
Vice President - Senior Analyst
Public Finance Group
Moody's FIS Domestic Sales Office - Boston MA
1 Post Office Square, 39th Floor
Boston, MA 02109-2103
U.S.A.
Beth I. Wexler
VP - Senior Credit Officer
Public Finance Group
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Releasing Office:
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MOODY'S AFFIRMS UNIVERSITY OF MIAMI'S (FL) A3 DEBT RATING; OUTLOOK IS STABLE