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Rating Action:

Moody's Assigns First-Time Aa2 Debt Rating to Ryerson University's Planned CAD130 Million Debenture

Global Credit Research - 28 Sep 2017

Toronto, September 28, 2017 -- Moody's Investors Service (Moody's) today assigned a Aa2 long-term debt rating to Ryerson University's planned CAD130 million senior unsecured debt issuance. The outlook is stable.

RATING RATIONALE

The Aa2 debt rating reflects Ryerson's strong market position, solid levels of liquidity and sound governance and management which makes effective use of multi-year planning. These strengths will help the university withstand an expected weaker provincial funding environment and pressures from a declining university age population in the province of Ontario.

The university's financial performance has been solid in recent years, highlighting a combination of strong enrolment demand and sound fiscal management. Operating revenue grew by an average 6.8% over the period 2013/14 to 2016/17, and Ryerson's operating cash flow margin (operating cash flow relative to operating revenue) averaged 11.5% over the same period. Moody's forecasts that the university's operating performance will remain strong in 2017/18 backed by strong enrolment demand and increased tuition revenue from international students. In Moody's view the university's cash flow position will remain strong, allowing it to accommodate the anticipated higher interest expense and principal payments.

The university's governance and management makes use of forward looking plans which will help address anticipated funding and enrolment challenges. Similar to most universities in Ontario, Ryerson will face flat levels of provincial operating grants and pressures arising from a declining domestic university age population in Ontario. The province is expected to introduce a new funding formula which will maintain funding allocations at 2016/17 levels if enrolment stays within a corridor of +/-3% of 2016/17 levels. To ensure the university continues to see enrolment growth, Ryerson will increase its efforts to attract international students, whose tuition growth is not subject to provincial tuition caps, which in Moody's view will help alleviate some of the enrolment pressures. Compared to many of the other Canadian universities rated by Moody's, Ryerson has a relatively low share of international students at present, and has capacity to increase this share over the medium-term.

Post bond issuance, the university's total debt is expected to rise to 0.4x operating revenue and its spendable cash and investments will decline to 1.2x total debt. Although these levels are weaker than the median levels of similarly rated Canadian peers, Moody's expects that the debt metrics will gradually improve over the medium term since no additional debt is expected to be issued for the next few years.

Ryerson is a comprehensive university located in downtown Toronto, offering a full range of academic and professional programs in addition to specialization through 10 zone learning modules focused on career advancement and entrepreneurship. Enrolment growth has been strong in recent years, with current enrolment exceeding 36,500 full-time equivalent (FTE) students. To support its enrolment growth, the university has completed a series of large-scale capital projects in recent years. The proceeds of the debenture will now be used to fund the university's downtown campus expansion, including the mixed use Daphne Cockwell Health Sciences Complex, as well as ongoing campus renewal.

RATIONALE FOR THE STABLE OUTLOOK

The stable outlook reflects Moody's opinion that the university will maintain solid financial metrics post debt-issuance given strong management practices and market position, which will allow it to cope with funding and enrolment pressures over the next 2-3 years.

WHAT COULD CHANGE THE RATINGS UP/DOWN

A continued increase in revenue sources and diversity leading to increased financial flexibility, and a material reduction in the university's debt burden could put upward pressure on the rating. A sustained deterioration in operating performance or a material decline in liquidity could place downward pressure on the rating.

The methodologies used in this rating were Global Higher Education published in November 2015, and Government-Related Issuers published in August 2017. Please see the Rating Methodologies 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 credit rating action on the support provider and in relation to each particular credit 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Adam Hardi
Asst Vice President - Analyst
Sub-Sovereign Group
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

David Rubinoff
MD - Sub-Sovereigns
Sub-Sovereign Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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