RATING ACTION IMPACTS $238.6 MILLION OF RATED DEBT OUTSTANDING INCLUDING THE CURRENT ISSUE
New York, March 19, 2012 -- Moody's Rating
Issue: Revenue Bonds, Wellesley College Issue, Series
J 2012; Rating: Aa1; Sale Amount: $55,000,000;
Expected Sale Date: 03/28/2012; Rating Description: Revenue:
501c3 Unsecured General Obligation
Issue: Wellesley College Taxable Bonds, Series K 2012;
Rating Aa1; Sale Amount: $95,000,000;
Expected Sale Date: 03/28/2012; Rating Description: Revenue:
501c3 Unsecured General Obligation
Opinion
Moody's Investors Service has downgraded Wellesley College's outstanding
bond ratings to Aa1 and Aa1/ VMIG 1 from Aaa and Aaa/VMIG 1 and assigned
Aa1 ratings to Wellesley's (Wellesley or the college) $55 million
of fixed-rate Series J revenue bonds issued through the Massachusetts
Finance Development Agency and $95 million of fixed-rate
Series K taxable revenue bonds. The rating action reflects a significant
increase in operating leverage with this new debt issuance combined with
the stagnant to negative trends of the college's core revenue streams
-- net tuition revenue and endowment draw which has contributed to
imbalanced operations by Moody's calculation. The outlook
has been revised to stable from negative, at the lower rating level.
SUMMARY RATING RATIONALE:
Wellesley's Aa1 rating reflects the college's superior student market
position with strong student demand, robust fundraising, and
large financial resource base providing significant support for debt and
operations. Offsetting these factors are the college's imbalanced
operating performance (by Moody's calculation) with limited operating
cash flow providing relatively thin debt service coverage, stagnant
net tuition revenue and a plan for extensive campus renovation partly
funded with this debt issuance. The Aa1/VMIG1 on the college's
variable rate demand bonds reflects the strength of the college's
self liquidity program.
CHALLENGES
*Negative pressure on core revenue streams, including flat net
tuition revenue and a reduced endowment draw, with a 6% decline
in total operating revenues from FY 2008 to FY 2011;
*Substantial new debt issuance increases Wellesley's operating
leverage significantly with FY2011 pro-forma debt to operating
revenue of 1.46 times;
*Very weak annual operating cash flow by Moody's calculation (-2.0%
three-year average deficit and 5.8% operating cash
flow margin) relative to Aaa-rated peers, which will require
the college to sustain strong giving and investment returns to support
long-term growth in financial resources and capital investment.
STRENGTHS
*Excellent student market position as a highly selective liberal arts
women's college with 2,266 full-time equivalent (FTE) undergraduate
students in fall 2011 with strong student demand;
*Substantial financial resources providing very strong cushion of
debt and operations;
*History of strong fundraising, with average annual gift revenue
from FY 2009 through 2011 of $39 million and average gifts per
student of $17,328 in FY 2011.
Outlook
The stable outlook reflects our expectation that Wellesley will maintain
its superior market position as the premier women's college in the
United States with outstanding philanthropic support to grow the balance
sheet to offset tuition discounting and new debt.
WHAT COULD MAKE THE RATING GO UP
Significant strengthening of operating cash flow coupled with growth of
financial resources to better support heightened debt
WHAT COULD MAKE THE RATING GO DOWN
Long-term and sustained deterioration of student market position;
significant increase in balance sheet leverage due to investment losses
and/or substantial additional borrowing; erosion of financial resources
or significant decline in liquidity
METHODOLOGY
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 30 April
2012. Further information on the EU endorsement status and on the
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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
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this announcement provides relevant regulatory disclosures in relation
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this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
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Eva Bogaty
Asst Vice President - 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
Kimberly S. Tuby
Vice President - Senior Analyst
Public Finance Group
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 DOWNGRADES WELLESLEY COLLEGE'S (MA) LONG-TERM RATING TO Aa1 FROM Aaa AND ASSIGNS Aa1 RATING TO $150 MILLION OF SERIES J TAX-EXEMPT AND SERIES K TAXABLE REVENUE BONDS; OUTLOOK IS REVISED TO STABLE FROM NEGATIVE