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Rating Action:

Moody's upgrades Loyola University of Chicago, IL to A1; outlook stable

23 Mar 2018

New York, March 23, 2018 -- Moody's Investors Service has upgraded Loyola University of Chicago (IL) to A1 from A2 on $292 million of debt issued through the Illinois Finance Authority and Illinois Educational Facilities Authority. The outlook is stable.

RATINGS RATIONALE

The upgrade to A1 is driven by Loyola University of Chicago's (Loyola or LUC) excellent and growing wealth levels, including strong liquidity, and its consistently good operating performance, better than expected with the assumption of higher debt service payments. The upgrade also reflects the continued successful execution of the university's strategic plans following the August 2016 installation of LUC's first lay president. The A1 further incorporates Loyola's comparatively large scale and well-established demand as a Jesuit urban comprehensive university in Chicago, highlighted by growing enrollment across diverse program offerings. Rapid debt reduction will continue to improve the university's leverage profile, while at the same time potentially contributing to slower growth of cash and investments. Offsetting challenges include a highly competitive market, reflected in comparatively low yield rates on accepted first year students and contributing to only modest ability to raise tuition. Further, fundraising is comparatively low relative to peers.

RATING OUTLOOK

The stable outlook reflects expectations of continued strong operating cash flow sufficient to maintain good liquidity even with large debt repayments, with generally stable student demand and tuition revenue growth.

FACTORS THAT COULD LEAD TO AN UPGRADE

- Substantial growth in cash and investments

- Revenue diversification, particularly from increased philanthropy

- Strengthening of brand and reputation, resulting in further improvement in student demand and tuition pricing power

FACTORS THAT COULD LEAD TO A DOWNGRADE

- Weakened operating cash flow in light of large upcoming principal repayments

- Deterioration in student demand, given a 75% revenue reliance on student charges

- Material debt issuance if not offset by expected revenue and reserve growth

LEGAL SECURITY

All of LUC's long-term debt is fixed rate. It has a $74 million commercial paper program, with payments of the maturing commercial paper supported by a LOC from PNC Bank, N.A. terminating in April 2019. There is a debt service coverage covenant of 1.2x in the agreement, with LUC reporting 2.25x for fiscal 2017. If there is a draw under the LOC, no repayment is required until one year following the draw, when LUC can choose to repay a draw in quarterly payments over a three-year period. The repayment schedule and over 800% monthly liquidity coverage provide good support of the university's demand debt.

USE OF PROCEEDS

Not applicable

PROFILE

Loyola University of Chicago is a private Jesuit, Catholic comprehensive multi-campus university. With headcount of nearly 17,000, it has a broad program offering for undergraduate, graduate and professional degrees, including medicine, law, nursing and engineering. The university includes Arrupe College, a two-year associates degree program for Chicago high school graduates launched in 2015 with the first graduating class in August 2017.

METHODOLOGY

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.

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 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 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.

Diane Viacava
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.
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