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Rating Action:

Moody's affirms Medical College of Wisconsin's A1; outlook stable

Global Credit Research - 19 Nov 2013

$194M rated debt affected

New York, November 19, 2013 -- Moody's Investors Service has affirmed the Medical College of Wisconsin's (MCW) A1 long-term and underlying bond ratings. This action affects approximately $194 million of rated revenue bonds issued through the Wisconsin Health and Educational Facilities Authority. The outlook is stable. The affirmation of the rating with a stable outlook factors MCW's good financial resources relative to a modest debt load, adequate operating margins, and favorable market position, offset by high exposure to healthcare.

SUMMARY RATING RATIONALE

The affirmation of the A1 rating with a stable outlook reflects MCW's niche position and status as one of only two medical schools in Wisconsin, co-location and affiliation with two prominent medical centers, continued good levels of financial resources to cushion a modest debt load, and adequate operating margins. These favorable attributes are balanced by MCW's small class size and significant exposure to the volatile healthcare sector, specifically fees for physician's services.

STRENGTHS

*The Medical College maintains strong relationships and shares a medical campus with Froedtert Hospital and Children's Hospital and Health System Inc. (Aa3 stable). MCW receives significant annual contract revenue from Froedtert and Children's to support MCW's research and teaching mission.

*MCW benefits from favorable student demand and selectivity (MCW's primary selectivity was 6.9% in FY 2013 and 5.9% in the Fall of 2013) and MCW is one of only two medical schools in Wisconsin.

*MCW benefits from a good financial resources cushion with pro forma expendable financial resources-to-direct debt of 389%. Liquidity is sufficient, with 241 monthly days cash on hand and monthly liquidity covers demand debt by a strong 753% at fiscal year-end (FYE) 2013.

*MCW has a track record of stable and adequate operating margins (9.6% operating cash flow margin in FY 2013).

*MCW's capital spending plans are modest in the coming years and the Medical College does not have new money debt plans.

CHALLENGES

*MCW is highly exposed to the volatile healthcare sector, as patient care activities accounted for 73% of MCW's total operating revenue in FY 2013.

*Competition for federal NIH research funding remains fierce, particularly given overall funding cuts due to sequestration.

*MCW is a niche provider and its small total enrollment of 1,212 students subjects it to volatility in student demand. Revenue diversity is challenged due to high reliance on patient service revenue, particularly from physician practices.

OUTLOOK

The stable outlook reflects MCW's importance as one of only two medical schools in the State of Wisconsin with strong student demand, co-location and strong relationships with two hospitals that provide physicians the opportunity to practice medicine and to conduct research, continued good levels of balance sheet resources to cushion debt and operations, and our expectation that the Medical College will continue to generate adequate operating margins.

WHAT COULD MAKE THE RATING GO UP

An upgrade may be warranted if MCW's balance sheet ratios and cushion to debt and operations continue to improve materially relative to peers and operating margins were to improve over a sustained period.

WHAT COULD MAKE THE RATING GO DOWN

A downgrade may be considered if MCW's balance sheet resources were to deteriorate materially, MCW posted a multi-year decline in operating margins or decline in enrollment, or MCW unexpectedly issued a material amount of new debt.

PRINCIPAL 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

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 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 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.

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.

Mark Pascaris
Vice President - Senior Analyst
Public Finance Group
Moody's Investors Service, Inc.
100 N Riverside Plaza
Suite 2220
Chicago, IL 60606
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Diane F. Viacava
VP - Senior Credit Officer
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
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JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms Medical College of Wisconsin's A1; outlook stable
No Related Data.
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