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Rating Action:

Moody's downgrades Yeshiva University, NY to B1 from Baa2; review for downgrade

Global Credit Research - 09 Jan 2014

$315M rated debt

New York, January 09, 2014 -- Moody's Investors Service has downgraded Yeshiva University's ("Yeshiva") rating to B1 from Baa2, and kept the rating on review for downgrade. The rating action reflects the university's extremely narrow unrestricted liquidity, resulting in reliance on external credit facilities to support operations, and prolonged severe cash flow deficits leading to financial resource erosion. The rating remains on review for downgrade to evaluate audited fiscal 2013 results, expected in March, and management's execution of strategic initiatives to improve liquidity and operating performance. Today's action concludes the review for downgrade initiated on October 9, 2013.

SUMMARY RATING RATIONALE

The magnitude of the downgrade to B1 reflects the depth of operating and cash flow deficits concurrent with extremely thin unrestricted liquidity and lack of a clear strategy to regain financial equilibrium. Minimal headroom, if any, expected under covenants exacerbates risks of limited liquidity and heavy reliance on external bank lines. Extraordinary reliance on the endowment to fund operations and cover debt service, likely to continue for the near-term, will erode or, at best, prohibit growth of financial reserves in line with peers.

The rating reflects the immediate need for an operating and financial turnaround that is sustainable and transparent throughout Yeshiva's consolidated businesses. Ongoing exposure to potentially negative reputational and financial impacts from pending litigation as well as organizational restructurings constrains the B1 rating.

Positive considerations for the rating include Yeshiva's niche market position as a comprehensive university in New York City under Jewish auspices with a history of strong donor support, healthy revenue diversity and marketable real estate. The rating favorably incorporates the relatively large size of the university's assets despite the high proportion that is restricted and an endowment with a high allocation to illiquid investments.

The review for downgrade will focus on our review and interpretation of Yeshiva's audited fiscal 2013 results, business and financial restructuring strategies, the status of financial covenants, and future borrowing.

WHAT COULD MAKE THE RATING GO DOWN

Further negative rating action could result if the university is unable to develop and successfully implement strategic efforts to improve cash flow and liquidity. Financial resource deterioration, a covenant breach, or inability to access external credit facilities or the debt market would also lead to negative rating pressure.

WHAT COULD MAKE THE RATING GO UP

Given the ongoing challenges faced by the university, an upgrade or return to a stable outlook are unlikely in the medium term. Confirmation of the B1 rating or upward rating pressure could result from successful execution of a clearly formulated strategy that results in balanced operations without damaging the university's reputation, improved liquidity, and resolution of pending legal claims with minimal financial impact.

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.

Emily Schwarz
Asst Vice President - Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Karen L Kedem
Vice President - Senior Analyst
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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

Moody's downgrades Yeshiva University, NY to B1 from Baa2; review for downgrade
No Related Data.
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