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06 Feb 2019
New York, February 06, 2019 -- Moody's Investors Service has assigned Aa2 ratings to New York University's proposed $657 million New York University Revenue Bonds, Series 2019A (Tax-Exempt), $125 million New York University Revenue Bonds, Subseries 2019B-1 (Taxable), and $65 million New York University Revenue Bonds, Subseries 2019B-2 (Taxable) (Green Bonds). The bonds will be issued by the Dormitory Authority of the State of New York. The last maturity of the fixed rate bonds will be in 2049. Moody's maintains Aa2 ratings on around $3.76 billion of the university's outstanding debt. The outlook is stable.
New York University's (NYU) Aa2 rating acknowledges its ongoing momentum in strategic revenue growth, global reach and prospects for gains in total wealth aided by donor support. Growth in financial reserves will also be fueled by retained surpluses especially as the pace of capital investment slows. With total cash and investments of $6.4 billion for fiscal year 2018, NYU benefits from strong wealth on an absolute basis, but its wealth is comparatively low relative to its scale of operations including thin operating liquidity at the NYU Langone Health System. The university's credit strength also reflects its increasingly global brand as a comprehensive research university with geographically diversified locations, student market strength, and effective risk management to mitigate its complex business model. Our opinion also incorporates the university's highly valuable and marketable real estate not included in our wealth calculations.
Offsetting considerations include NYU's very high financial leverage and reliance on patient care for over 60% of operating revenue in a very fragmented and competitive health care market.
Our analysis is based on a consolidated view of NYU and its affiliate, NYU Langone Health System, which includes subsidiaries NYU Langone Hospitals (NYULH, formerly known as NYU Hospitals Center) and NYU Winthrop Hospital. Moody's rates the separately secured debt of NYU Hospitals Center A3 stable.
The stable outlook reflects our expectations that NYU will continue to see strengthening of clinical and student demand, contributing to strong cash flow and ongoing excellent fundraising. The outlook is also predicated on the assumption that the university's very high leverage will gradually begin to moderate over time.
FACTORS THAT COULD LEAD TO AN UPGRADE
- Material growth in spendable cash and investments relative to operating expenses and debt
- Sustained strengthening of student and clinical market strength combined with increased donor support
FACTORS THAT COULD LEAD TO A DOWNGRADE
- Credit deterioration of NYULH, particularly if marked by narrowing cash flow
- Material increase in financial leverage or reduction in unrestricted liquidity given already comparatively high debt and low liquidity levels
NYU's rated revenue bonds issued under its May 2008 resolution are unsecured general obligations of the university, which includes its School of Medicine. NYU is not obligated on the debt obligations of NYU Langone Health System or its subsidiaries, and NYU Langone Health System and its subsidiaries are not obligated on the debt of NYU. For bonds issued through DASNY before 2008, repayment is a general obligation of the university, secured by tuition, fees, and other university revenue equal to Maximum Annual Debt Service. The Series 1998A bonds also have a cash funded debt service reserve fund.
The separately secured bonds of NYU Langone Hospitals are jointly secured by a pledge of gross receipts and a mortgage of certain health care facilities of NYU Langone Hospitals.
USE OF PROCEEDS
Proceeds will be used to finance or refinance various capital projects in Manhattan and Brooklyn, including the 181 Mercer Street project, as well as to pay costs of issuance.
NYU is a large, comprehensive, research-intensive university serving over 45,000 full-time equivalent students on its campuses in Manhattan, Brooklyn, Abu Dhabi, and Shanghai. The university's sizeable enrollment, robust research enterprise, and high acuity academic medical center generated $11.7 billion in revenue in fiscal 2018.
While NYU Langone Health System and its subsidiaries are not part of the university's obligated group, they are incorporated in our credit opinion.
The principal methodology used in these ratings was Higher Education published in December 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
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.
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
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Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
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