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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.
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
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
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.
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.
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and issued with no amendment resulting from that disclosure.
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rating and, if applicable, the related rating outlook or rating
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
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Asst Vice President - Analyst
Moody's Canada Inc.
70 York Street
Toronto, ON M5J 1S9
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
MD - Sub-Sovereigns
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Moody's Canada Inc.
70 York Street
Toronto, ON M5J 1S9
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
No Related Data.
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