New York, November 19, 2012 -- Moody's Investors Service has affirmed the Baa1 rating on Linfield College's (OR) 2005 Series A and 2010 Series A Revenue Bonds issued through the Oregon Facilities Authority. The rating outlook remains stable.
SUMMARY RATING RATIONALE
The Baa1 rating is based on Linfield College's established market position with challenges for undergraduate enrollment from a highly competitive student market, though balanced by a diversity of program offerings across three divisions; positive operations with growing net tuition revenue; and an adequate financial resource cushion relative to debt and operations, with fixed rate debt and no near term borrowing plans.
*Historically solid operating performance evidenced by an average operating surplus of 4.9% over the past three fiscal years (FY) 2010 to 2012; healthy operating cash flow of 13.4% provided good debt service coverage of 3.0 times for FY 2012.
*Established undergraduate market position for this primarily regional liberal arts college in Oregon with full-time equivalent (FTE) enrollment of 2,253 in fall 2012; diversity of program offerings as the college operates three distinct divisions across several locations around the state.
*Adequate balance sheet cushion with expendable financial resources of $58.4 million in FY 2012, up 44% over FY 2010 ($40.4 million), providing a cushion of 1.38 times debt and 0.93 times annual operations.
*No additional borrowing plans beyond the current offering in the near term, with all debt fixed rate.
*Competitive student market environment with a number of private and public institutions in the Pacific Northwest, evidenced by weakening selectivity and matriculation measures and variable enrollment over the past several years.
*High reliance on student charges (84.5% of operating revenue as calculated by Moody's) underscoring the need to maintain growth in net tuition revenue as well as a solid market position.
*Manager concentration within the endowment presents some business risk in the event of fund failure; as of September 30, 2012, the college had three funds representing 18.4%, 14.6%, and 13.6% of the portfolio.
The stable outlook reflects our expectation that the college will work toward stabilization of its traditional undergraduate market position, maintain strong enrollment at the Portland campus and DCE divisions, continue to produce healthy operating performance, and build balance sheet reserves through favorable operating performance and fundraising, with no near-term borrowing plans.
WHAT COULD MAKE THE RATING GO UP
Sustained strengthening of student market demand reflected in growing net tuition revenue and improved matriculation rates; growth of financial resources to cushion debt and operations
WHAT COULD MAKE THE RATING GO DOWN
Weakening of net tuition revenue and operating margins; deterioration of the financial resource base cushioning debt and operations; additional debt without commensurate growth in resources
PRINCIPAL 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.
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Mary Kay CooneyAsst Vice President - Analyst Public Finance Group250 Greenwich StreetNew York, NY 10007 U.S.A. Eva Bogaty Asst Vice President - 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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