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Rating Action:

Moody's downgrades Yeshiva University, NY to B3 from B1 and concludes review for downgrade; outlook negative

05 Mar 2014

$315M rated debt

New York, March 05, 2014 -- Moody's Investors Service downgraded Yeshiva University's ("Yeshiva") rating to B3 from B1 and assigned a negative outlook. Today's action concludes the review for downgrade initiated on January 9, 2014.

SUMMARY RATING RATIONALE

The downgrade to B3 from B1 reflects the continued weakening of the university's financial viability given the rapid deterioration of unrestricted liquidity from severe and ongoing operating deficits. The rating action also incorporates the subordinate position of bondholders to other debt and the potential for deeper subordination as access to external credit facilities may require additional collateral.

The B3 rating favorably incorporates the university's valuable real estate holdings in New York City that could provide full recovery for bondholders, sufficient liquidity for near term debt service, healthy philanthropic support, and niche market position.

The negative outlook incorporates the need for Yeshiva to implement swift plans to reduce deficits and grow liquidity in order to continue operations.

CHALLENGES:

*Extremely thin and unstable unrestricted liquidity, with significant reliance on external facilities, poses the highest risk to the university's viability. As of fiscal yearend (FYE) 2013, unrestricted cash and investments that could be liquidated within one month covered 91 days of expenses. But excluding the fully drawn $75 million line of credit, the university had only 49 days of cash on hand.

*Increasingly severe operating deficits require extraordinary endowment draws and release of temporarily restricted net assets. The university projects FY 2014 performance will be similarly weak to FY 2013 results.

*Narrow headroom on covenants for external credit facilities, cross-default provisions on these lines, and near-term expiration of one facility on June 1, 2014, heighten the risk of low liquidity.

*Given the severity of deficits and low liquidity, we anticipate it will take several years before management, in conjunction with consultants, can stabilize financial performance.

STRENGTHS:

*Significant real estate holdings in Manhattan and the Bronx might well provide for a full recovery for bondholders. To date, the board has approved the development and implementation of a strategy for the monetization of up to $250 million of real estate assets.

*Yeshiva's unique role as a comprehensive university operated under Jewish auspices drives student demand and strong philanthropic support. An unusually large real estate gift, which was sold in FY 2013, helped grow total cash and investments and the released portion boosted unrestricted financial resources.

*Healthy revenue diversity, with research grants and contracts representing the largest revenue source (31.9% of total operating revenue in FY 2013) will provide operational flexibility as the university implements its strategic plans.

OUTLOOK

The negative outlook reflects the risk of liquidity depletion before management is able to execute a turnaround plan.

WHAT COULD CHANGE THE RATING UP

An upgrade or stable outlook is unlikely in the near-term given the magnitude of financial challenges faced by the university. Upward rating pressure could result from a substantial improvement in unrestricted liquidity through the monetization of real estate or sizeable gifts combined with execution of a fiscally sustainable business plan, without damaging the university's market position.

WHAT COULD CHANGE THE RATING DOWN

A default or debt restructuring deemed by Moody's to be a distressed exchange would lead to a downgrade. Failure to improve unrestricted liquidity and narrow operating deficits without extraordinary releases, the inability to access external liquidity facilities, additional subordination of rated debt, or loss of accreditation could also lead to further rating pressure.

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.

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
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JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades Yeshiva University, NY to B3 from B1 and concludes review for downgrade; outlook negative
No Related Data.
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