New York, December 07, 2012 -- Moody's Investors Service has affirmed the A3 rating on Samford University's$30.8 million of Series 2001 and Series 2007A revenue bonds. The outlook remains negative.
SUMMARY RATING RATIONALE
The A3 rating is based on the university's established student market position, diversified undergraduate, graduate, law and pharmacy programs with growing net tuition revenue. It also reflects positive cash flow from operations producing ample debt service coverage, healthy gift support, and adequate liquidity. Credit challenges include increased debt burden over the last four years, the majority of it variable rate debt with covenant requirements, a thin balance sheet cushion and a growing unfunded pension liability; although the university is planning to decrease its variable rate exposure through a refinancing in early 2013 and will soft-freeze its defined benefit pension plan as of December 31, 2012.
The negative outlook reflects the university's increased debt, continued elevated exposure of variable rate debt and potential risks of debt acceleration due to violations of financial covenants, coincident with a sizeable pension obligation. Despite these risks, we note that Samford has not relied on its operating line of credit in three years, has implemented a plan to close its defined benefit plan, anticipates refinancing certain demand obligation debt early in 2013, and has no near term borrowing plans.
*Stable student market position for this private university that is one of largest in the US with a Southern Baptist affiliation, located in the Birmingham, Alabama metropolitan area, reflecting consistent enrollment levels (4,538 full-time equivalent (FTE) enrollment in fall 2012) and steady net tuition revenue growth.
*Near breakeven operating performance in fiscal year (FY) 2012, but recent positive performance, provided an average FY 2010 to FY 2012 operating margin of 3.7%, operating cash flow margin of 12.7% and healthy debt service coverage of 3.4 times. FY 2013 has been budgeted for a modest surplus and is currently on pace. The improved performance has allowed the university to reduce its reliance on an operating line of credit.
* Healthy liquidity with monthly unrestricted cash and investments of $109 million providing 329 days of operating expenses for FY 2012.
* Solid gift revenue with average FY 2010 to FY 2012 gift revenue of $3,233 per student, including ongoing support from the Alabama Baptist Convention (approximately $4.8 million annually) and contributions from the $200 million "A Campaign for Samford" publically launched in October 2009, which has raised $149 million ($111 million cash and $38 million pledges) as of September 30, 2012.
* A planned debt restructuring early in calendar year 2013 will refinance some prior variable rate debt to fixed rate during calendar year 2013, which will reduce the university's variable rate debt exposure to 50% from 79% of total outstanding debt. The university has no additional new money borrowing plans at this time.
*Variable rate debt comprises 79% of the pro forma debt total of $149.6 million and the $19.7 million Series 2010A bonds have a bank put option on December 1, 2013 and annually thereafter. The letter of credit on the Series 2008A bonds have a stated termination date of November 1, 2013. Samford plans to refinance the Series 2010A bonds and a portion of the Series 2008A bonds in early 2013 to a fixed rate mode, reducing the variable risk exposure.
*Underfunded defined benefit (DB) pension plan, with only 62% funding per GAAP (84% funded according to the IRS Special Funding Target Attainment Percentage (FTAP), which guides funding requirements) or $62 million underfunded, although the Board of Trustees recently voted to freeze new entrants to the DB plan as of 12/31/12, phase in a new defined contribution plan thereafter, and eventually seek to annuitize the DB plan. Samford has been making supplemental endowment draws to make additional contributions to the DB plan.
*Highly leveraged balance sheet with limited debt capacity and a thin resource cushion relative to comparably rated institutions. In July 2012 (FY 2013), Samford issued $25 million in a private bank loan to build new residence halls. Operating leverage has increased, with debt to operating revenues of 1.1 times as compared to a median of 0.7 times for A-rated private universities. Pro forma debt of $149.6 million is cushioned by expendable financial resources only 0.42 times. We note financial resources are depressed by $62 million of liabilities associated with the university's defined benefit pension plan.
The negative outlook reflects the university's increased debt, continued elevated exposure of variable rate debt and potential risks of debt acceleration due to violations of financial covenants, coincident with a sizeable pension obligation. We note that the university has near term plans that may positively impact these credit attributes including a plan to close its defined benefit plan. Management also anticipates refinancing certain demand obligation debt early in 2013.
WHAT COULD CHANGE THE RATING UP
Not likely in the near-term; significant and sustained improvement in operating performance and cash flow; meaningful growth of financial resources, strengthening of student demand, particularly at the undergraduate level; further reduction in debt structure risks.
WHAT COULD CHANGE THE RATING DOWN
Further weakening in operating performance and cash flow; deterioration in student market position or financial resources; covenant violation or increased likelihood of covenant violation within letter of credit reimbursement agreements or bank agreements; potential material increase in debt with unscheduled put potential relative to the university's liquidity.
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.
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.
Mary CooneyAsst Vice President - Analyst Public Finance Group250 Greenwich StreetNew York, NY 10007 U.S.A. Dennis 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.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED,DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.
All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit 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. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error negligent or otherwise or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.
MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations -- Corporate Governance -- Director and Shareholder Affiliation Policy."
Any publication into Australia of this document is by MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657, which holds Australian Financial Services License no. 336969. This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001.
Notwithstanding the foregoing, credit ratings assigned on and after October 1, 2010 by Moody's Japan K.K. ("MJKK") are MJKK's current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. In such a case, "MIS" in the foregoing statements shall be deemed to be replaced with "MJKK". MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO.
This credit rating is an opinion as to the creditworthiness or a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser.
Private Krankenversicherung Tarifvergleich
Heute im Fokus
Euro in New York schwach. Siemens erhält Großauftrag. TUI halbiert Anleihevolumen. Renova beteiligt sich auch an Dresser-Rand. Android-Smartphones bekommen Verschlüsselung als Standard. Stühlerücken im Celesio-Vorstand. S&P: MaterialScience-Börsengang ohne Auswirkung auf Bayer-Rating. Apple startet Verkauf der neuen iPhones.
Diese Aktien sind auf den Kauflisten der Experten
Welche US-Aktien könnten zum Jahresende hin steigen?