NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms the 'F1+' rating on the following short-term debt of Northwestern University (Northwestern):
--$260.8 million Illinois Finance Authority adjustable-rate revenue bonds;
--$300 million taxable commercial paper (CP) program.
SECURITY
Revenue bonds and CP are an unsecured general obligation of Northwestern, payable from all legally available funds.
KEY RATING DRIVERS
RESOURCE SUFFICIENCY: The 'F1+' rating is based on Northwesterns' ability to cover the maximum potential liquidity demands presented by its variable rate debt program by at least 1.25 times (x) from internal resources. Such resources include cash and highly liquid, highly rated investments.
FINANCIAL STRENGTH OF NORTHWESTERN: The university maintains a strong financial profile, fueled by a fairly diverse revenue base; substantial balance sheet resources; significant fundraising ability; and moderate debt burden. Fitch maintains a long-term 'AAA' rating on Northwestern's revenue bonds with a Stable Rating Outlook.
RATING SENSITIVITIES
FINANCIAL DETERIORATION: Erosion to Northwestern University's internal resource base or to its general credit profile to the point where the university could no longer sufficiently cover its variable-rate obligations, while unlikely, would put downward pressure on the rating.
CREDIT PROFILE
Northwestern is a selective, comprehensive private university with campuses in Evanston, Chicago and Qatar. Northwestern's fall 2015 demand remained stable. Fall 2015 full-time equivalent enrollment totaled 16,245, up about 1% over the prior year. Freshman applications were down a modest 1.6% over this same period, reaching 33,128 for fall 2015, but up about 7% since fall 2011. The university's freshman acceptance rate was an impressive 12.8%, with a solid 47.7% of accepted students choosing to enroll. Northwestern's graduate programs, which maintain similarly selective admissions as its undergraduate programs, account for about half of total enrollment.
Northwestern's strong financial profile is characterized by consistently positive operations that are funded by a fairly diverse revenue base; substantial balance sheet resources; considerable fundraising ability, including a $3.75 billion fundraising campaign publicly launched in fiscal 2014; and a manageable debt burden.
LIQUID RESOURCES SUPPORT SHORT-TERM DEBT
As of Dec. 31, 2015, Northwestern's liquid investment pool, consisting of cash, cash equivalents and U.S. Government securities, had a balance of $1.13 billion (after discounts based on asset type and maturity per Fitch's short-term rating criteria). These liquid assets would cover the university's full $300 million of authorized CP ($160 million outstanding Jan. 22, 2016) and $260.8 million of weekly resetting adjustable-rate revenue bonds, well in excess of the 1.25x criteria requirement which Fitch typically expects for an 'F1+' rating.
To limit potential calls on its liquidity, Northwestern restricts the amount of CP notes that may come due on any given day to $50 million. In addition, the university has access to six general purpose bank lines of credit with a combined limit of $350 million. While these lines of credit are not dedicated solely to a failed remarketing, they are available to the university for same-day funding. Northwestern's detailed procedures for handling a failed remarketing of VRDBs and/or rollover of CP notes are regularly updated, reflecting favorably on management.
For additional information, see 'Fitch Rates Northwestern Univ's (IL) Series 2015 Revs 'AAA'; Outlook Stable,' dated April 23, 2015.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria
Revenue-Supported Rating Criteria (pub. 16 Jun 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012
U.S. College and University Rating Criteria (pub. 12 May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748013
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1001901
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1001901
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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