CHANNELS

Subscribe to the InfoTech eNewsletter

infoTECH News

TMCNet:  Fitch Affirms Albany College of Pharmacy and Health Sciences (NY) at 'A-'; Outlook Stable

[March 18, 2014]

Fitch Affirms Albany College of Pharmacy and Health Sciences (NY) at 'A-'; Outlook Stable

NEW YORK --(Business Wire)--

Fitch Ratings has affirmed the long-term rating of 'A-' on $11.7 million of civic facility revenue bonds series 2004A issued by the Albany Industrial Development Agency on behalf of Albany College of Pharmacy and Health Sciences (ACPHS or the college).

The Rating Outlook is Stable.

SECURITY

The series 2004A bonds are secured by a pledge of gross revenues and a mortgage lien and security interest in the student center and classroom building (now the library building), as well as a debt service reserve fund (DSRF) funded to annual debt service.

KEY RATING DRIVERS

STABLE CREDIT CHARACTERISTICS: The 'A-' continues to reflect the college's strong operating performance and solid financial cushion, supported by prudent financial management and a favorable demand profile. Offsetting factors include the college's high tuition dependence, regional student draw, and exposure to variable rate debt obligations.

NICHE PROGRAMS SUPPORT STRONG MARGINS: Despite possible margin compression in coming years, Fitch expects stable demand for ACHPS' pharmacy and health-related programs, coupled with prudent financial management, to fuel consistently positive operating performance and strong coverage.

BALANCE SHEET AFFORDS FINANCIAL FLEXIBILITY: The college's balance sheet resources, which continue to grow due to strong margins, provide flexibility and cushion against unforeseen variances in operations.

MANAGEABLE DEBT PROFILE: ACPHS's debt burden remains moderate, with no plans for debt-supported projects in the near term. Fairly significant exposure to variable rate debt, partially hedged, is somewhat mitigated by the college's track record of managing the various risks associated with these instruments.

RATING SENSITIVITIES:

MARGIN EROSION: The college is highly reliant on student revenues, which can be subject to fluctuations based on regional competition and demand for specific programs. If not properly managed, such fluctuations could cause significant erosion of historically positive margins, negatively pressuring the rating.

ADDITIONAL DEBT ISSUANCE: While not currently expected, additional debt, in amounts that materially affect the college's financial profile, could pressure the rating.

CREDIT PROFILE

ACPHS was founded in 1881 and is the oldest pharmacy school in New York State. The college offers six undergraduate programs and five graduate programs in health sciences, as well as a doctor of pharmacy degree (Pharm.D.). The Pharm.D. program is offered on the main campus in Albany and on the Colchester campus, the only pharmacy school in Vermont. The college is accredited by the Middle States Commission on Higher Education, which extended its accreditation in 2010 for another 10-year term. The Pharm.D. program is separately accredited by the Accreditation Council for Pharmaceutical Education, which extended its accreditation in 2011 for a six-year term.

NICHE PROGRAMS SUPPORT STABLE DEMAND

A focus on pharmacy and health sciences programs, which Fitch notes are regionally and nationally in demand, drives the college's stable demand profile. Despite its primarily regional draw, ACPHS has consistently generated strong application volume and stable incoming student yields. FTE enrollment of 1,623 has largely stabilized, growing 0.9% annually on average over the past five years.

Importantly, strong freshmen-to-sophomore retention rates have contributed to enrollment stability. The college's well-managed enrollment base, despite growing regional competition, partially offset concerns related to its high reliance on student-generated revenues (87.8% of fiscal 2013 operating revenues). While the tuition discount rate has increased slightly in recent years, Fitch notes that it remains low (15.6%) and manageable.

STRONG MARGINS SUPPORT BALANCE SHEET

Through prudent financial management and favorable student demand, ACPHS has consistently generated robust positive operating margins over the past nine years. The operating margin was a strong 7.8% in fiscal 2013, but was below the prior five-year average margin of 14.1%. The college expects moderate margin compression through fiscal 2015, owing largely to competitive pressures, but expects to continue to generate soundly positive margins. Fitch notes that smaller positive margins are still consistent with the rating category, especially considering the college's balance sheet, which is much improved in recent years, and strong budgetary controls.

Strategic reinvestment of operating surpluses over the past five fiscal years has nearly doubled the college's available funds, defined by Fitch as cash and investments not permanently restricted. As of June 30, 2013, available funds totaled $46.3 million, representing a solid 99.2% of fiscal 2013 operating expenses ($46.7 million) and a stronger 146.9% of total pro-forma long-term debt ($31.5 million, inclusive of non-cancellable operating leases). Fitch notes positively the college's practice of setting aside surpluses for quasi-endowment and capital investment.

MODERATE DEBT BURDEN WITH VARIABLE RATE DEBT

The college's strong operating performance drove high MADS coverage of 4.2x in fiscal 2013. Fitch-calculated MADS of $2.4 million occurs in fiscal year 2029.

The college's debt burden is moderate, as MADS accounted for 4.8% of fiscal 2013 operating revenues. However, its debt portfolio is fairly aggressive, with two series of variable rate demand bonds (VRDBs) accounting for 53.5% of total bonded debt. Positively, outstanding VRDBs are fully supported by irrevocable, direct pay letters of credit (LOCs) provided by TD Bank, NA (rated 'AA-'/'F1+' by Fitch). One LOC was renewed in August 2013, well ahead of expiration, and extended to 2016. The other LOC expires in December 2014.

Additionally, ACPHS's VRDBs are partially hedged by an interest rate swap, also provided by TD Bank, NA. One of two original swaps expired in January 2013, and the remaining swap hedging 28.2% of VRDBs outstanding, will expire in December 2014 with the related LOC. The college is evaluating its capital structure in advance of the expiration of its interest rate swap agreement in December 2014. Fitch notes that ACPHS's leadership team has historically demonstrated prudence in managing the risks associated with its outstanding VRDBs and expects management to address the expiration of the LOC and swap in a similar manner.

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

Applicable Criteria and Related Research:

'U.S. College and University Rating Criteria' (May 10, 2013);

'Fitch Upgrades Albany College of Pharmacy and Health Sciences, NY's Revs 'A-'; Outlook Stable' (April 4, 2012)

Applicable Criteria and Related Research:

U.S. College and University Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708049

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=824173

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.


[ InfoTech Spotlight's Homepage ]


blog comments powered by Disqus

FOLLOW US

Subscribe to InfoTECH Spotlight eNews

InfoTECH Spotlight eNews delivers the latest news impacting technology in the IT industry each week. Sign up to receive FREE breaking news today!
FREE eNewsletter