|[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).
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
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.
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
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
Northwestern University, Illinois
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