06.12.2012 23:41
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Institute for Advanced Study, NJ -- Moody's assigns Aaa rating to the Institute for Advanced Study's (NJ) Taxable Bonds, Series 2012 and affirms existing Aaa/VMIG 1 ratings; outlook is stable

Institute has $68.2 million of rated debt outstanding including the current issuance

New York, December 06, 2012 --

Moody's Rating

Issue: Taxable Bonds, Series 2012; Rating: Aaa; Sale Amount: $15,000,000; Expected Sale Date: 12-12-2012; Rating Description: Revenue: 501c3 Unsecured General Obligation

Opinion

Moody's Investors Service has assigned a Aaa rating to the Institute for Advanced Study's ("IAS") Taxable Bonds, Series 2012 and affirmed the Aaa/ VMIG 1 ratings on outstanding bonds. The rating outlook remains stable.

SUMMARY RATING RATIONALE

The Aaa rating reflects the institute's established market reputation as a premier theoretical research institution in the field of mathematics, natural sciences, social science, and historical studies, exceptionally strong financial resources cushion relative to debt and operations, and consistently positive operating cash flows. Credit challenges include high reliance on investment income and complex investment strategy that includes a large portion of less liquid investments. The VMIG 1 ratings reflect the institutes own credit profile combined with the terms of standby bond purchase agreements with Wells Fargo Bank.

STRENGTHS

*One of the world's leading centers for theoretical research and intellectual inquiry, the institute awards fellowships to some 200 visiting members every year, from about one hundred universities and research institutions throughout the world.

*Exceptionally strong financial resources relative to debt and operating expenses with total cash and investments currently (October 31, 2012) valued at $619 million. FY 2012 expendable financial resources provided 6.8 times coverage to pro-forma debt and 7.8 times coverage to operations.

*Improved fundraising initiatives resulting in increased gift flow, with three-year average annual gift revenue of approximately $47.5 million.

*Strong operating flexibility with the ability to decrease expenses as they relate to Members, including post-doctoral candidate positions, and planned faculty increases.

CHALLENGES

*Heavy operating reliance (FY 2012: 42.1%) reliance on investment income makes the institute vulnerable to the market fluctuations.

*Unusually low monthly liquidity of $31.1 million, relative to rating, providing a thin 68.5% coverage to total demand debt in FY 2012. However, the institute has $27 million of investments in hedge funds on which the lock up period has expired which can be accessed if required. Including those, the ratio improves to 130%. Additionally, the institute has two line of credit totaling $50 million which it could potentially access.

*Complex investment strategy which favors relatively illiquid assets results in relatively modest liquidity compared to Aaa-rated peers. As on 30 June 2012, the institute had 86.7% of its investments in private equity and hedge funds. FY 2012 monthly liquidity was only 5% of total cash and investments - notably lower than most other Aaa-rated peers.

Outlook

The stable outlook is based on our expectation that the institute will continue to manage its investments and finances prudently, and that its robust financial resources relative to debt and operating expenses will not change materially in the near term. The stable outlook also incorporates our assumption that the institute will continue to monitor its monthly liquidity to enable it to repay any potential debt acceleration.

WHAT COULD MAKE THE RATING GO UP

Not applicable.

WHAT COULD MAKE THE RATING GO DOWN

Significant investment losses; reduction in investment liquidity; material and sustained reduction in the philanthropic support; erosion of financial resources and weakening of operating performance.

The Rating was assigned by evaluating factors believed to be relevant to the credit profile of Institute For Advanced Study , such as i) the business risk and competitive position of the issuer versus others within its industry or sector, ii) the capital structure and financial risk of the issuer, iii) the projected performance of the issuer over the near to intermediate term, iv) the issuer's history of achieving consistent operating performance and meeting budget or financial plan goals, v) the nature of the dedicated revenue stream pledged to the bonds, vi) the debt service coverage provided by such revenue stream, vii) the legal structure that documents the revenue stream and the source of payment, and viii) and the issuer's management and governance structure related to payment. These attributes were compared against other issuers both within and outside of the Institute's core peer group and the rating is believed to be comparable to ratings assigned to other issuers of similar credit risk.

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.

Pranav Sharma 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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