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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

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Rating Action:

Moody's assigns Aa2 to Emory University's (GA) Series 2020A, 2020B & 2020C bonds; outlook stable

04 May 2020

New York, May 04, 2020 -- Moody's Investors Service has assigned Aa2 ratings to Emory University's (GA) proposed $784 million Taxable Bonds, Series 2020A (fixed rate, maturing 2050), $252 million Emory University Revenue Bonds, Series 2020B (fixed rate, maturing 2043) and $353 million Emory University Revenue Bonds, Series 2020C (fixed rate, maturing 2037). The 2020B and 2020C bonds will be issued through the Private Colleges and Universities Authority. Depending on market conditions, Emory may upsize the new issue amount to incorporate additional refunding opportunities. Concurrently we have affirmed the Aa2 and Aa2/VMIG 1 ratings on approximately $1.85 billion of fixed rate and variable rate bonds, and P-1 short-term ratings on its taxable and tax-exempt commercial paper programs with combined $750 million authorization. The rating outlook is stable.

RATINGS RATIONALE

The assignment and affirmation of the Aa2 rating reflects Emory's substantial, rapidly growing scope of operations and significant wealth bolstered by solid donor support. Very good strategic positioning incorporates its national brand and important market role of its consolidated Emory Healthcare (EHC) as a high-end tertiary/quaternary medical center located in Atlanta, Georgia, a region with favorable demographics. However, Emory has a very high 70% exposure to healthcare operations that is rising as EHC expands its clinical network through acquisitions and partnerships. Competitive and regulatory pressures of the healthcare sector weigh on EHC's ability to integrate its recent 2018 acquisition, evidenced by softer fiscal 2019 operations. Emory's credit profile is strongly tied to the performance of its healthcare enterprise, which faces operational challenges related to responses to the COVID-19 outbreak, including a temporary state-mandated suspension of elective procedures. Operational challenges will persist through fiscal 2020 and may be more pronounced in fiscal 2021 depending on impacts on healthcare operations and student enrollment. Recent investment losses will cause near term softening in wealth and liquidity. The magnitude of weakening will be tempered by management's actions to pare spending along with receipt of revenue from recently passed federal financial aid packages. Additional considerations include lagging net tuition revenue growth relative to peers and modest reserves and liquidity relative to operations. In addition, leverage will substantially increase with the current issuance, a credit challenge during a period of significant uncertainty.

We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. There is a high degree of uncertainty around the extent and length of the impact of the outbreak as well as the magnitude and timing of federal and other relief. Emory currently has significant financial and market resiliency, along with management strength, to navigate these turbulent times at its current rating level. However, due to a deteriorating global economic outlook, risks remain firmly to the downside, potentially causing additional credit stress across Emory's multiple revenue streams, as well as reserves.

The VMIG 1 and P-1 short-term ratings reflect Emory's long-term credit quality combined with ample liquid assets and sound treasury management.

RATING OUTLOOK

The stable outlook reflects our expectation that Emory will successfully manage through the next year of challenging credit conditions while making progress in integrating its recent healthcare acquisitions. Our outlook incorporates our expectation that Emory will be able to move to improved and sustained operating cash flow margins of at least 10% by fiscal 2022, with ongoing favorable fundraising support. Should downside risks accelerate, the rating or outlook could be negatively impacted.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS

- Material growth in spendable cash and investments relative to operating expenses and debt

- Sustained improvement of operating cash flow margins, student and clinical market strength

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS

- Escalation of downside risks associated with the coronavirus pandemic and associated global macroeconomic instability

- Inability to sustainably integrate recent healthcare-related acquisitions for stronger fiscal performance

- Additional leverage or further reduction of liquidity

- Sustained weak coverage of demand debt from self-liquidity (short-term rating)

LEGAL SECURITY

Emory's bonds and commercial paper are on parity and are backed by its unsecured general obligation pledge payable from legally available funds.

USE OF PROCEEDS

Proceeds of the Series 2020A bonds will be used to: fund identified university and healthcare capital projects; refund the Series 1994B, 1995B, 1999B and 2011A bonds and a portion of the taxable CP; and pay costs of issuance.

Proceeds of the Series 2020B bonds will be used to: refund a portion of the taxable CP; all outstanding tax-exempt CP; and pay costs of issuance. Emory is planning for the fully refunded tax-exempt CP program to expire. Self-liquidity support will continue for the taxable CP program.

Proceeds of the Series 2020C bonds will be used to refund the Series 2005B, 2005C and 2013C bonds, and pay costs of issuance. Following the redemption of these bonds, Emory expects to eliminate the immediate need for self-liquidity support for its variable rate bonds.

PROFILE

Emory University is a large private comprehensive research university located in Atlanta, Georgia with 14,458 full-time equivalent (FTE) students in fall 2019. The university includes Woodruff Health Sciences Center, with Emory's schools of medicine, nursing and public health with Emory Healthcare, its system of healthcare operations. For fiscal 2019, Emory recorded $6.4 billion in consolidated operating revenue, including $4.5 billion of patient care revenue.

METHODOLOGY

The principal methodology used in the long-term ratings was Higher Education published in May 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1175020. The principal methodology used in the short-term ratings was Municipal Bonds and Commercial Paper Supported by a Borrower's Self-Liquidity Methodology published in October 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1146778. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

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

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website 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.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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.

Mary Cooney
Lead Analyst
Higher Education
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
US
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Susan Fitzgerald
Additional Contact
Higher Education
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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