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TMCNet:  Fitch Affirms Northwestern University's (IL) Short-Term Rating at 'F1+'

[February 18, 2014]

Fitch Affirms Northwestern University's (IL) Short-Term Rating at 'F1+'

NEW YORK --(Business Wire)--

Fitch Ratings affirms the 'F1+' rating on Northwestern University's (Northwestern) $260.8 million of outstanding Illinois Finance Authority adjustable-rate revenue bonds and $300 million taxable commercial paper (CP) program ($130 million currently outstanding).

SECURITY

Revenue bonds and CP are an unsecured general obligation of Northwestern, payable from all legally available funds.

KEY RATING DRIVERS

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.

RESOURCE SUFFICIENCY: The 'F1+' rating is based on Northwestern's ability to cover the maximum potential liquidity demands presented by its variable rate debt programs by at least 1.25x from internal resources. Such resources include cash and highly liquid, highly rated investments.

RATING SENSITIVITIES

FINANCIAL DETERIORATION: Erosion to Northwestern's internal resource base to the point where the university could no longer cover its variable-rate obligations by at least 1.25x, while highly unlikely, would put downward pressure on the short-term rating.

CREDIT PROFILE

Northwestern is a selective, comprehensive private university with campuses in Evanston, Chicago and Qatar. Fall 2013 full-time equivalent enrollment totaled 16,162, relatively flat with the prior year and up 3.1% since fall 2009. Freshman applications increased 29.3% over this same period, reaching 32,813 for fall 2013. The university's freshman acceptance rate was an impressive 14%, with a solid 44.4% of accepted students choosing to enroll. Northwestern's graduate programs, which maintain similarly selective admissions as its undergraduate programs, account for just over half of total enrollment.

LIQUID RESOURCES SUPPORT SHORT-TERM DEBT

As of Dec. 31, 2013, Northwestern's liquid investment pool, consisting of cash, cash equivalents and U.S. Government securities, had a balance of $1.2 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 and $260.8 million of adjustable-raterevenue bonds by a solid 2.15x, exceeding the 1.25x coverage Fitch expects for an 'F1+' rating.

Northwestern intends to convert $75 million of outstanding series 2008-A and 2008-C (now combined into series 2008-D) adjustable-rate bonds and $135.8 million of outstanding series 2004-A and 2004-B (now combined into series 2004-C) adjustable-rate bonds on the March 3, 2014 mandatory tender date to weekly reset mode from annual put mode. The university's $50 million of outstanding series 2008-B adjustable-rate bonds will remain in weekly reset mode.

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 general purpose bank lines of credit with a combined limit of $300 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.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Rating U.S. Public Finance Short-Term Debt' (Dec. 9, 2013);

--'Northwestern University, Illinois' (Oct. 18, 2013).

Applicable Criteria and Related Research:

Rating U.S. Public Finance Short-Term Debt

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724680

Northwestern University, Illinois

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=719403

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=820921

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.


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