UNIVERSITY HAS $173 MILLION OF RATED DEBT OUTSTANDING
New Jersey Educational Facilities Authority
NEW YORK, Jun 29, 2011 -- Moody's Investors Service has affirmed William Paterson University's
("WPU") A1 rating on the University's outstanding debt issued through
the New Jersey Educational Facilities Authority ("NJEFA") which is
listed in the RATED DEBT section of the report. The rating outlook remains
SUMMARY RATING RATIONALE
The A1 rating is based on William Paterson University's stable market position
as a mid-sized comprehensive public university, consistent generation of healthy
operating performance and cash flow margins to provide strong debt service
coverage, and good unrestricted liquidity. The rating also incorporates the
University's leveraged position from a debt and operating perspective and
ongoing capital needs in a state that has historically provided limited capital
support and is experiencing ongoing financial stress.
*Consistently healthy operating performance with an operating margin averaging
8.3% annually from fiscal year (FY) 2008-FY 2010 and strong cash flow to provide
good average debt service coverage of 2.7 times over the same period. Moody's
expects positive financial trends to continue based upon consistent net tuition
*Stable market position as a comprehensive regional public university in
suburban Wayne, New Jersey, approximately 20 miles from New York City with fall
2010 full-time equivalent (FTE) enrollment at 8,873 students.
*Growing financial resource base, particularly unrestricted financial resources,
driven largely through retained operating surpluses and various student fees.
Total financial resources have tripled since FY 2006 to $111.7 million with a
significant 80%, or $91.7 million, of unrestricted resources designated for
academic programs, capital projects, and quasi-endowment.
*High debt burden with debt to operating revenues at 0.9 times and maximum
annual pro-forma debt service (MADS) representing an elevated 8.2% of the
University's operating expenses in FY 2010.
*Competitive market position with a regional draw as 98% of enrollment is from
within the state, which could be impacted by the need to continue increasing
tuition in light of state budget cuts.
*Ongoing capital needs with capital plans that will deplete
unrestricted financial resources approximately $10 million over two years, with
plans to borrow within two years for a parking facility.
*Significant reliance on state funding from the State of New Jersey, which was
downgraded by Moody's to Aa3 with a stable outlook from Aa2 with a negative
outlook on April 27, 2011 due to the state's weakened financial position. The
University expects FY 2012 appropriations to remain relatively flat to slightly
declining from FY 2011 with state appropriations representing a declining share
of operating support for the University (approximately 30% in FY 2010 compared
to 37% in FY 2006), as calculated by Moody's.
DETAILED CREDIT DISCUSSION
LEGAL SECURITY: Payments under the Lease Agreement are an unsecured general
obligation of the University with lease payments to be paid from any legally
available funds. The Series 2000A, 2002E, and 2004A bonds are additionally
secured by a pledge of net revenues of various projects and debt service reserve
DEBT STRUCTURE: All of the University's debt is fixed-rate.
DEBT-RELATED INTEREST RATE DERIVATIVES: None.
MARKET POSITION/COMPETITIVE STRATEGY: In fall 2009 and fall 2010, the
University's enrollment rebounded from prior years of flat to
declining enrollment levels due to completion of significant campus
construction on its student center. Enrollment grew nearly 12% to 8,873 FTE
students in fall 2010 from 7,941 FTE students in fall 2008, largely attributed
to growth of its undergraduate programs. Undergraduate students comprise 92% of
WPU's student population, including enrollment of students in a community
college program at Mercer County Community College ("MCCC"). The
University began the partnership with MCCC in fall 2009 with an eye to
diversifying its tuition revenue, in addition to increasing its on-line classes.
Graduate enrollment declined 5.6% to 686 FTE students in fall 2010 from 727 FTE
students in fall 2009 which management attributes to lower enrollment in its
masters of education programs. The University's graduate enrollment has
fluctuated over the past five years with management currently focused on growing
graduate enrollment by introducing and expanding programs in high demand
careers. Fall 2011 will mark the first class of doctoral students at the
University, with approximately 20 students enrolled in the nursing program.
The University received an increase in application for fall 2011
undergraduate enrollment and projects another year of enrollment growth based on
current deposits. In April of 2011, the University hired an
enrollment management professional for a newly created position reporting
directly to the President.
OPERATING PERFORMANCE: The University's operating margin grew to 10.4% in FY
2010 from 6.4% FY 2009, more aligned with prior fiscal years, through a
combination of strong growth of net tuition and student fees and containment of
expenses. Based on projected unaudited financials provided by management, we
expect FY 2011 operating performance to be relatively consistent or slightly
improved from FY 2010.
BALANCE SHEET POSITION: WPU's balance sheet will remain highly leveraged as a
result of the University's limited capital support from the State. In FY 2010,
expendable financial resources of $111.3 million covered debt and operations
0.62 times and 0.63 times, respectively. The University's unrestricted
monthly liquidity, however, is relatively favorable with $93.4 million of
monthly liquidity which provides approximately 204 monthly days cash on hand.
GOVERNANCE AND MANAGEMENT: Dr. Kathleen M. Waldron became the seventh president
of William Paterson University in August 2010. Dr. Waldron previously served as
president of Baruch College of the City University of New York prior to joining
The Middle States Commission on Higher Education completed its 10-year review of
the University in April, 2011, reporting that the University met the standards
mandated by the Commission with the expectation that the University will receive
reaccreditation in June 2011 when the report is finalized. WPU met 13 of the 14
standards, with the unmet standard relating to long-range planning, which the
University is currently addressing through development of a strategic plan. The
Middle States Commission is an accrediting body that undertakes periodic
evaluations for degree-granting colleges and universities in Delaware, Maryland,
New Jersey, New York, Pennsylvania, Puerto Rico, and the Virgin Islands.
The stable outlook is based on Moody's expectation that William
Paterson University will maintain a stable student market position,
strong operating performance to cover debt service, and has limited
additional borrowing plans in the near-term.
WHAT COULD MAKE THE RATING GO UP
Substantial growth in liquid financial resources to provide a larger cushion for
debt and operations; continued healthy operating performance and growth in net
WHAT COULD MAKE THE RATING GO DOWN
Additional debt exceeding growth in financial resources or weakening of its
financial resource cushion; deterioration of operating cash flow or deep and
sustained operating deficits; pressure on student market with stagnant or
declining net tuition revenues; pressure on the state's rating or ongoing
reduction of state appropriations without the ability to offset cuts
KEY INDICATORS (FY 2010 financial data; fall 2010 enrollment data)
Total FTE Enrollment: 8,873 students
Comprehensive Debt: $187.1 million (includes operating leases)
Direct Debt: $180.7 million
Operating Revenues: $196.3 million
Monthly Liquidity: $100.7 million
Monthly Days Cash on Hand (unrestricted funds available within 1 month divided
by operating expenses excluding depreciation, divided by 365 days: 220.2 days
Expendable Resources to Direct Debt: 0.62 times
Expendable Resources to Operations: 0.63 times
Three-Year Average Operating Margin: 8.3%
Operating Reliance on Student Charges (% of total operating revenues): 58.9%
Operating Reliance on State Appropriations (% of total operating revenues):
State of New Jersey General Obligation Rating: Aa3/stable
Series 2000A and 2004A: A1; insured by FGIC
Series 2002E: A1; insured by XLCA
Series 2005E: A1; insured by FSA
Series 2008C: A1; insured by Assured Guaranty Corp.
William Paterson University: Stephen Bolyai, Vice President for Finance and
NJEFA: Jennifer Soyka, Director of Project Management, 609-987-0880
PRINCIPAL METHODOLOGY USED
The principal methodology used in this rating was Public College and
Universities published in November, 2006.
Information sources used to prepare the credit rating are the following: parties
involved in the ratings, parties not involved in the ratings, public
information, confidential and proprietary Moody's Investors Service information,
and confidential and proprietary Moody's Analytics information.
Moody's Investors Service considers the quality of information available on the
credit satisfactory for the purposes of maintaining a credit rating.
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Erin V. Ortiz
Public Finance Group
Moody's Investors Service
Diane F. Viacava
Public Finance Group
Moody's Investors Service
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
MOODY'S AFFIRMS WILLIAM PATERSON UNIVERSITY'S (NJ) A1 RATING; OUTLOOK REMAINS STABLE
Moody's Investors Service, Inc.
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