Transcript Document Title - West Virginia University

U.S. Higher Education Outlook and Key
Metrics
WVAHEFO Spring Conference, May 2011
[email protected]
[email protected]
2
Agenda
 Overview of Moody’s Rated Higher Education Portfolio
 Moody’s Outlook for Higher Education
 Recent Rating Activity
 Key Rating Factors & Metrics
 Liquidity Measures
 Questions/Discussion
May 2011
3
Publics Rated Higher on Average, Privates have Higher
Share of Aaa’s
•Moody’s currently rates 220 U.S. public
colleges and universities, with over $100.9
billion of debt outstanding.
•Moody’s rates approximately 300 private
colleges and universities in the US, with
over $75.4 billion of debt outstanding.
•More than 90% of enrollment
•More than 70% of enrollment
•More than 3/4, or 77%, of public universities
rated A1 or higher
•Only about 1/3, or 36%, of private
colleges/universities rated A1 or higher
U.S. Public University Rating Distribution
U.S. Private University Rating Distribution
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
Aaa
Aa1
Aa2
Aa3
A1
A2
A3
Baa1 Baa2 Baa3
May 2011
4
Mixed Outlook for 2011: Critical Credit Challenges Facing
Public Colleges and Universities:
State budget gaps persist; lower tax receipts due to recession;
depletion of state reserves resulting in funding cuts and payment delays
 End of ARRA funding in 2011
Flat Pell Grant Support & Placing Burden of Tuition Growth on
Students and Families in Era of Reduced Family Equity -Causing Market
Shifts Favoring Both Lowest Cost and Highest Reputation Competitors
Differing Degrees of Pressure on Non-Tuition Revenues Placing a
Premium on Business Line Diversity Highlighting the Need to Respond
to Changing Student Environment
Need for Stronger Management of Operating Costs, Balance Sheet
Risks and Capital Plans
May 2011
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State Budget Gaps Result in Growing Dependence on
Student Charges
Median Revenue Dependence for Rated Public College and
University Portfolio
45%
40%
35%
30%
25%
20%
15%
2006
2007
2008
State Appropriations
2009
2010
2011*
2012*
Student Charges
*projected
May 2011
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More Downgrades, but Still Relative Stability
Private University Activity 2005 - 2010
Public University Activity 2005 - 2010
100%
4%
2%
2%
5%
8%
6%
1%
2%
1%
1%
1%
3%
90%
100%
90%
80%
80%
70%
70%
60%
50%
7%
7%
10%
5%
5%
90%
87%
84%
50%
88%
14%
30%
30%
20%
20%
10%
7%
3%
1%
4%
2%
2005
2006
2007
71%
78%
72%
80%
76%
40%
3%
3%
2%
5%
10%
60%
88%
1%
4%
86%
40%
0%
4%
3%
3%
5%
3%
5%
2008
2009
2010
10%
0%
69%
7%
5%
3%
4%
4%
3%
2005
2006
2007
7%
14%
9%
10%
13%
2009
2010
3%
2008
Downgrade
Affirmation/Outlook Change Down
Downgrade
Affirmation/Outlook Change Down
Affirmation/Stable Outlook
Affirmation/Outlook Change Up
Affirmation/Stable Outlook
Affirmation/Outlook Change Up
Upgrade
Upgrade
May 2011
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RATING OUTCOMES: Judgment About Quality of Leadership is Key
Market Strength
Patient/Student
Capital Needs,
Demand
Debt and
Other Liabilities
Governance &
Operating
Management
Performance
Financial
Resources &
Liquidity
Legal Structure
Covenants of Debt
May 2011
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Key Rating Metrics and Medians: Public Colleges and
Universities FY2009
Aaa
Aa1
Aa2
Aa3
A1
A2
A3
Market Position
Operating Revenue ($000)
2,980,136
2,023,975
1,053,334
382,721
175,666
92,986
64,600
Primary Selectivity (%)
61.7
71.0
65.5
72.9
73.3
61.6
68.0
Primary Matriculation (%)
45.7
37.6
40.9
38.9
41.5
39.5
50.6
Net Tuition per Student ($)
9,284
9,044
6,665
7,132
5,932
5,640
3,863
193,686
101,109
55,525
18,585
4,406
2,593
1,073
13.2
9.7
9.6
9.1
10.2
10.1
6.9
3.8
3.5
3.2
2.6
2.4
2.7
1.5
20.6
31.0
29.3
42.4
47.5
47.4
39.8
2,622,465
1,477,520
660,219
149,792
71,348
32,876
10,858
Expendable Financial Resources to Direct Debt (x)
1.8
1.4
1.1
0.9
0.6
0.4
0.3
Expendable Financial Resources to Operations (x)
0.77
0.51
0.43
0.43
0.37
0.28
0.12
Debt to Operating Revenues (x)
0.51
0.35
0.43
0.50
0.66
0.83
0.63
Monthly Days Cash on Hand (x)
165.3
131.9
113.7
114.9
117.2
99.1
39.1
Monthly Liquidity to Demand Debt (%)
226.7
210.6
860.8
356.8
147.0
35.4
31.3
Average Gift Revenue ($000)
Operating Performance
Operating Cash Flow Margin (%)
Average Debt Service Coverage (x)
Revenue Diversity (Max Single Contribution) (%)
Balance Sheet and Capital Plan
Total Cash and Investments ($000)
May 2011
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New Liquidity Ratios: Try to Answer Simple Question
Liquidity
by Donor
Restriction
Liquidity
by
Investment
Type
May 2011
Higher Ed: Key Findings for New Liquidity Data
» Due to endowment model, higher ed sector has more cash & investments than health care
sector
» 85% of private colleges and 58% of public colleges have > 90 days monthly cash on hand
» Private colleges & universities have median monthly days cash on hand of 229 days
» Public colleges & universities have median monthly days cash on hand of 128 days
» Despite the fact that a large portion of investments are less liquid, coverage of demand debt
is very strong
» Median monthly liquidity to demand debt is 268% for publics; 188% for privates
» Publics have far less demand debt
» Outliers:
» Some credits in portfolio have monthly liquidity to demand debt of < 1.2x
» When this is the case, we examine
» What other resources might be available
» Whether obligor can borrow from restricted funds
» Term –out provisions
» Market Access/Renewal Plans
May 2011
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Public University Monthly Liquidity Varies Directly with Rating Category
while Portion of Wealth Varies Indirectly
$1,400
$1,200
72%
$1,179
80%
70%
58%
60%
$1,000
50%
$800
34%
40%
$600
30%
$400
20%
$200
$200
$108
$0
10%
0%
Aaa
Monthly Liquidity (millions)
Aa
A
Monthly Liqudity/Total Cash and Investments
May 2011
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Public 2010 Liqudity Medians by Rating
200
500%
180
450%
160
474%
361%
400%
140
350%
120
300%
180
100
250%
136
107
80
60
200%
150%
117%
40
100%
20
50%
0
0%
Aaa
Aa
Monthly Days Cash
A
Monthly Liquidity to Demand Debt
May 2011
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Higher Education and Not-for-Profit Team
Main Number 212.553.0300
Managing Director:
Analysts:
John Nelson x4096
Eva Bogaty x7124
Dennis Gephardt x7209
Team Leaders:
Edith Behr x0566
Karen Kedem x3614
Mike Gusta x3792
John Lombardi x2829
Jenny Maloney x1388
Erin Ortiz x4603
Leah Ploussiou x4789
Team Administrator:
Devika Ramdat x4953
Pranav Sharma x7164
Kimberly Tuby (Boston) 617.204.5638
Diane Viacava x4734
Stephanie Woeppel x4840
May 2011
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Questions/Discussion
May 2011
15
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May 2011