06.12.2012 00:01
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Colgate University, NY -- Moody's affirms Colgate University's (NY) Aa3 rating; outlook is stable

University has $163.9 million of rated debt outstanding

New York, December 05, 2012 -- Moody's Investors Service has affirmed Colgate University's (NY) Aa3 rating, affecting $163.9 million of rated debt outstanding. The Series 2010A and 2012A bonds were issued through the Madison County Capital Resources Corporation. The Series 2003A, 2003B, 2004A, and 2005A bonds were issued by the Madison County Industrial Development Agency. The Series 1996 bonds were issued by the Dormitory Authority of New York State. The outlook is stable.

SUMMARY RATING RATIONALE

The Aa3 rating reflects the university's strong reputation as a highly selective liberal arts university, conservative fiscal and enrollment management practices, financial resources that provide solid support for operations and debt, and consistent fundraising at healthy levels. The rating also considers likely additional debt plans, revenue growth that is expected to be constrained going forward balanced by healthy cash flows, the challenging economic environment, and competition for students amongst top tier institutions.

STRENGTHS

*Strong national reputation as a highly selective, liberal arts university with an emphasis on undergraduate education and research.

*Healthy financial resources that comfortably support debt at current levels and covers annual operating costs. Total financial resources in FY 2012 were $679.8 million, and expendable financial resources of $358.8 million covered debt by 2.2 times and operations by 2.1 times.

*Prudent fiscal practices and careful management oversight leading to positive operating and healthy cash flow margins.

*Consistent fundraising with relatively strong annual gifts, averaging $28.8 million for the three years ended June 30, 2012, coinciding with conclusion of the university's last comprehensive fundraising campaign.

CHALLENGES

*Declining demographics in northeast region combined with highly competitive market for students amongst top tier institutions.

*Significant combined reliance on economically sensitive student charges and investment income for revenue, from which 65% and 20% of FY 2012 operating revenues, respectively, are derived.

*Increasing financial aid given the university's commitment to maintain a diverse student body with a strong academic profile, and increased financial aid being offered by competing institutions. As a result, net tuition per student declined 2% from FY 2011 to FY 2012. We expect continued pressure to grow net tuition revenue in the future.

*Future capital spending and debt issuance needed to remain competitive and attractive to prospective and current students. The university has plans to issue additional debt, and while the amount issued could be as much as $50 million, the amount, structure and timing of any issuance has yet to be determined.

Outlook

The stable outlook reflects our expectation that student demand will remain healthy; the university's conservative budgeting practices, including careful management of enrollment, which will contribute to continued healthy cash flow and positive operations; continued satisfactory financial resource coverage of debt; and healthy fundraising.

WHAT COULD MAKE THE RATING GO UP

Significant increase in financial resources; further improved and sustained operating margins; strengthening of market demand.

WHAT COULD MAKE THE RATING GO DOWN

Sizeable and sustained declines in operating margins; declining trend of student demand and enrollment; continued pressure on net tuition revenue growth; substantial additional borrowing that is not offset by growing financial resources.

PRINCIPAL METHODOLOGY USED

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.

Please see the credit ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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.

Jenny L. Maloney Vice President - Senior Analyst Public Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Dennis M. Gephardt Vice President - Senior Analyst Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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