17.11.2012 01:30
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Northwest Missouri State University, MO -- Moody's assigns A3 rating to Northwest Missouri State University's $54.4 million of Housing System Refunding Revenue Bonds, Series 2012; outlook is stable

University has $79.2 million of pro-forma rated debt, including current offering

New York, November 16, 2012 -- Moody's Rating

Issue: Housing System Refunding Revenue Bonds Series 2012; Rating: A3; Sale Amount: $54,360,000; Expected Sale Date: 11-23-2012; Rating Description: Revenue: Public University Limited Pledge

Opinion

Moody's Investors Service has assigned an A3 rating to Northwest Missouri State University's ("Northwest") $54.4 million of Housing System Refunding Revenue Bonds, Series 2012. At this time, we have also affirmed the A3 ratings on the university's outstanding rated debt. The rating outlook is stable.

SUMMARY RATINGS RATIONALE:

The A3 rating reflects Northwest Missouri State University's market position as a regional public university with a healthy out-of-state student draw, satisfactory financial resource coverage of pro-forma debt and operations, growing net tuition per student, and management team engaged in careful budgeting. The rating also incorporates the 4.6% enrollment decline in fall 2012, weak operating margin in FY 2012 expected to continue into FY 2013, recent declines in state appropriations, as well as the very narrow revenue pledge for all three revenue bond pledges (Housing System, Recreation System and Parking System).

STRENGTHS

*Established market position as a regional university located in Maryville, MO, 95 miles north of Kansas City and 100 miles south of Omaha, Nebraska. The university had enrollment of 5,662 full-time equivalent (FTE) students in fall 2012, of which 93% were undergraduates and 31% were out-of-state.

*Significant expendable financial resource growth the past two fiscal years, from $24.9 million in FY 2010 to $41.1 million in FY 2012, lead to improved coverage of pro-forma debt and operations at 0.46 and 0.4 times respectively in FY 2012. There are currently no plans to draw down these reserves.

*Mandatory student fees dedicated to debt service payments that can be increased if necessary, coupled with a sum sufficient rate covenant and cash funded debt service reserve fund provide bondholder security. Student fee increases are not limited by a tuition freeze or state approval.

*Improving liquidity, though still thin, which is important given state appropriation reductions. Monthly liquidity of $19.4 million provided 79 days coverage of expenses (on an expense base of $101.6 million) and a healthy 2 times coverage of the foundation's variable rate debt.

CHALLENGES

*Thin debt service coverage from narrow revenue pledges provided by the Housing, Parking and Recreation System bonds. The university manages the coverage closely to the sum sufficient requirement, and the systems benefit from fund balances, which were used in 2009 to make up for insufficient debt service coverage from pledged revenues in the case of the Parking System bonds. See the LEGAL SECURITY section for additional information.

*Weakening operating performance, with an operating margin of 1.6% in FY 2012 down from 3.1% in FY 2011, is expected to continue into FY 2013 due to fall 2012 enrollment declines.

*Enrollment pressure, with a 4.6% decline in FTE enrollment for fall 2012, due primarily to weak high school demographics in the area combined with more Missouri students attending community college without paying tuition through the state's "A+ program". Management plans to reach out increasingly to out-of-state students to maintain enrollment levels.

*Declining state support from Aaa-rated State of Missouri, down 12.9% from $32.6 million in FY 2010 to $28.4 million in FY 2012, has pressured operating margins. Management has responded budgeting prudently and cutting expenses.

Outlook

Moody's stable outlook reflects the university's established market position and expectations for continued adequate balance sheet coverage of debt, the university's moral and strategic inclination to support debt service payments on the system bonds, limited future debt issuance, and expectations for at least break-even operating performance.

WHAT COULD CHANGE THE RATING UP

Stable enrollment and net tuition revenue growth combined with sustained improvement in operating performance; increased net assets and liquidity; strengthened debt service coverage from pledged revenues

WHAT COULD CHANGE THE RATING DOWN

Weakening of revenue at the housing, parking or recreation systems leading to weakened coverage; continued pressure on enrollment or limited net tuition per student growth; weakening of operating margin; decline in state appropriations; reduced liquidity; additional debt issuance without corresponding resource growth and revenues

RATING 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

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody'sInvestors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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.

Information sources used to prepare the rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service's information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

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.

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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.

Emily Schwarz 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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