Assessing Higher Education Credit Risk
International Forum on Investment in Private Higher Education
Susan Fitzgerald, Sr.Vice President susan.fitzgerald@moodys.com Elizabeth Veasey, Analyst elizabeth.veasey@moodys.com
Moody’s Investors Service February, 2003
Moody’s Higher Education Ratings Group
Analysts: NY, Dallas, SF Ratings:
270
10
private colleges/universities:
of total market, 85% of colleges with revenues above $100 million $36 billion of outstanding debt
170
15%
public colleges, universities, and systems:
90%
of total market $44 billion of outstanding debt
International:
Canada, UK, Chile, Spain
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Moody's Portfolio By Segment
(underlying/unenhanced only)
55%
15%
30%
Public Colleges and Universities Private Colleges and Universities Others
Total rated dollar volume $18.9 billion in 2003 Public Universities borrowed $11 billion Private Colleges borrowed $6 billion Other non-profit organizations borrowed $3 billion
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Borrowing To Modernize & Compete
Higher Education New Debt
20 18 16 14 12 10 8 6 4 2 0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
$Bill.
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Investment in Strategic Core Business Drives Borrowing
UNIVERSITY BUSINESS LINES
Competitive Barriers To Entry Facilites Needed Customer Ages
INSTRUCTION Low Barriers Internet, Classrooms 18-Retired CAREER TRAINING Low/Moderate Barriers Internet, Classrooms, Equipment 18-55
SOCIAL DEVELOPMENT High Barriers Residential Campus 18-25 RESEARCH High Barriers Laboratories, Equipment na
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Higher Education Credit Analysis
analysis is both quantitative and qualitative. Key factors are: market position financial resources operating performance, cash flow, and debt service coverage state relationship and regulatory environment debt position, capital funding sources strategy and management
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Credit
Several Factors Currently Straining Credit Quality
2003 Rating Actions by Sector
30 25 20 15 10 5 0 PRV Upgrades PUB NFP Dow ngrades PREP CCD
Initial Ratings
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QUESTIONS & ANSWERS