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Rating Action:

Moody's assigns (P)Aaa rating to NTU's MTN programme and Aaa rating to bond offering

14 Oct 2021

Singapore, October 14, 2021 -- Moody's Investors Service, ("Moody's") has today assigned local currency and foreign currency senior unsecured ratings of (P)Aaa to Nanyang Technological University's (NTU) multicurrency medium term note (MTN) programme and a local currency senior unsecured rating of Aaa to a drawdown from that programme with a maturity in 2036.

According to the terms and conditions available to Moody's, the bonds issued under the MTN programme will constitute direct, unconditional unsubordinated and unsecured external obligations of NTU; they will also rank pari passu with all current and future senior unsecured debt obligations of the issuer. A portion of the proceeds from the bonds will be used to fund eligible projects under NTU's Sustainability Framework.

The ratings mirror NTU's issuer rating of Aaa with a stable outlook.

RATINGS RATIONALE

NTU's Aaa issuer rating and aaa BCA reflect its relatively large scale and a strong market profile, a track record of healthy financial performance, ample liquidity and low leverage against the backdrop of a favorable operating environment for higher education in Singapore, as well as strong financial governance. The university also benefits from strong operating, research and funding relationships with the Government of Singapore (Aaa stable).

Established in 1991, NTU is one of the two largest publicly-funded autonomous universities in Singapore. It has expanded significantly from the original focus of its predecessor institution, Nanyang Technological Institute, on training engineers and educators to become a comprehensive, research-intensive university, including a wider range of research and course offerings in the humanities, social sciences, business, medicine and environmental studies. Apart from the expansion in the breadth of its programs, many of NTU's offerings have achieved high rankings in global surveys and have bolstered its academic reputation. The university has also expanded its professional and continuing education programs in line with the Singapore government's goals towards wider economic restructuring.

Beyond the near-term outlook, NTU faces challenges from population ageing in Singapore, with the shrinking size of domestic undergraduate-age cohorts expected to weigh on total enrollment over the next decade. However, the university expects population pressures to be offset somewhat by continued growth in international students and participation in its postgraduate programs. Overall, both on scale, which is an indicator of resilience to shocks, and brand and strategic positioning, NTU is strong amongst universities rated globally.

NTU has a favorable track record of financial performance with its earnings before interest, depreciation, amortization and other large noncash expenses (EBIDA) margin averaging 12.7% of operating revenue — adjusted to smooth out investment income — over the ten-year period between 2011 and 2020. Operating surpluses have been underpinned by the stable and predictable government support for operations, development and research. The global coronavirus pandemic has not negatively impacted enrolment for either its undergraduate or postgraduate programs, aided by both the favorable operating environment for higher education in Singapore and NTU's burgeoning reputation; at the same time, prior investments in technology and infrastructure have allowed for minimal disruptions to its operations. Moody's expects operating performance to stay strong as the university continues to attract students and researchers, while keeping a sound management of its expenses.

Notwithstanding its relative youth, NTU has amassed formidable holdings of cash and investments that underpin an exceptional degree of financial flexibility given ample coverage of both operating expenditure and total debt. The strength of the university's financial resources also reflects a conservative risk appetite and resulting asset allocation that prioritizes liquidity and predictability.

Although the university's financial performance and wealth provide abundant resources for debt servicing, the government absorbs much of the debt servicing burden through the provision of subsidies under the Debt-Grant Framework. This arrangement is an additional factor, strengthening the visibility and stability of NTU's strong financial position.

Moody's assesses NTU's financial policy and strategy to be very strong, reflecting its track record of sustaining robust financial metrics and an enterprise risk management framework that incorporates a very low tolerance for risk. Moreover, the university benefits from the Singapore government's oversight of NTU's strategic planning and policymaking, while providing autonomy with regards to curriculum design, research and operations.

NTU's Aaa issuer rating takes into consideration the university's BCA of aaa, as well as Moody's assumption of a very high likelihood that NTU receives extraordinary government support should it face acute financial stress. Moody's assessment of support from the government to NTU is based on the university's prominent position within Singapore's higher education system, and the importance of universities to the country's key policy goals of increasing participation in higher education and ongoing economic restructuring.

Moody's assigns a very high default dependence between the university and the national government, reflecting the shared exposure to prolonged economic shocks.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS

Environmental risks for the higher education sector in Singapore are considered low. Singapore as a low-lying island nation is vulnerable to rising sea levels over the long run, with potential consequences including coastal erosion and more frequent and severe flooding. However, while Singapore is exposed to environmental risk, it is well positioned to adopt climate adaptation strategies given the institutional, technical and financial resources at its disposal. Environmental considerations are not material to NTU's credit profile, although it is somewhat exposed to the climate-related risks facing the sovereign.

Demographic and societal trends present the greatest social risks within the Singapore higher education sector. Over the medium term, demographic pressures stemming from a declining domestic undergraduate-age population will present a challenge to universities.

However, social risks are considered moderate for NTU, because it identifies and actively manages these risks at the highest levels. Mitigants to such population pressures include the university's ability to diversify its course offerings and revenue away from restrictions placed government-subsidized enrollment, such as those for Singaporean undergraduates. Accordingly, its professional and continuing education programs have been designed in line with the government's wider economic restructuring initiatives.

The university's governance risks are considered low, reflecting the strong institutional framework for the higher education sector in Singapore. NTU's standards of governance are considered high and are aligned with the general standards of governance for all Singaporean public universities. The Board of Trustees, each of whom is appointed by the Minister for Education, provides oversight over the strategic planning and policymaking of the university.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

NTU's final issuer rating of Aaa and BCA of aaa cannot be upgraded.

While unlikely, a reduction in the government's financial support to NTU or a change in the debt subsidy program for approved capital projects would indicate a lowering of the potential for extraordinary support and may lead to a downgrade of NTU's ratings.

NTU's BCA and ratings could also be downgraded if the university registered a sustained deterioration in its financial performance, a substantial rise in borrowing, or a significant reduction in cash and investments that leads to a material decline in the coverage of expenditure and/or debt outstanding.

The methodologies used in these ratings were Higher Education Methodology published in August 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1257002, and Government-Related Issuers Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186207. 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.

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 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 http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.

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.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK 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.

Christian de Guzman
Senior Vice President
Sovereign Risk Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Marie Diron
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

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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