|[April 22, 2014]
Fitch Rates Miami University (OH) Revs 'AA'; Outlook Stable
NEW YORK --(Business Wire)--
Fitch Ratings assigns an 'AA' rating to approximately $134.9 million of
Miami University (MU or the university) general receipts revenue, series
The fixed rate series 2014 bonds are expected to price via negotiated
sale on or about the week of May 5. Proceeds will be used to fund
various infrastructure improvements, residence hall and dining facility
renovations, and costs of issuance.
In addition, Fitch affirms the 'AA' rating on $400.6 million of MU
general receipts revenue bonds and general receipts revenue and
refunding bonds; and $105.4 million of MU federally taxable general
receipts revenue bonds designated as Direct Payment Build America Bonds.
The Rating Outlook is Stable.
General receipts revenue bonds are secured by a pledge of the
university's general receipts, which are primarily comprised of tuition
and fees, net auxiliary revenues, revenues from educational activities,
unrestricted gifts, and investment income.
KEY RATING DRIVERS
STABLE CREDIT CHARACTERISTICS: The 'AA' rating reflects Miami's positive
operations over the last four years, sound balance sheet resource
cushion, and stable enrollment profile.
RELIANCE ON (News - Alert) STUDENT-GENERATED REVENUES: Due to limited operating support
from the state of Ohio ('AA+'; Stable Outlook), MU is unusually reliant
on tuition and fee revenues, including from out-of-state students, to
balance its operating budget compared to other public universities.
ACTIVE, ENGAGED LEADERSHIP: The university's proactive management team
has successfully executed a plan to turn around previously
deficit-generating operations and continues to perform rigorous
MANAGEABLE DEBT BURDEN: Though the issuance of the series 2014 bonds
will increase MU's debt burden, the university's conservative debt
structure and its ability to generate adequate coverage from operations
are viewed as somewhat mitigating this concern.
ENROLLMENT MANAGEMENT: Given the university's high dependence on
student-generated revenues, deterioration of its strong demand profile
and stable enrollment base could negatively pressure the credit.
ADDITIONAL DEBT: While not expected in the near term, additional debt
that increases the university's moderately high debt burden without
commensurate growth in available resources could negatively pressure the
MU was established in 1809 and commenced its liberal arts-based
instruction in 1824, making it the second oldest public university in
the state of Ohio. The university's well-maintained main campus is
located in Oxford, OH, approximately 35 miles north of Cincinnati. The
university also maintains two regional campuses in Hamilton and
Middletown, OH, a learning center in West Chester, OH and a European
campus in Luxembourg. The university is accredited by the Higher
Learning Commission of the North Central Association of Colleges and
Schools, which last renewed Miami's accreditation in 2005 for a term of
SOLIDLY POSITIVE FINANCIAL PERFORMANCE
MU's financial profile has exhibited stability since Fitch's last
review. Audited results for fiscal 2013 indicate a fourth consecutive
year of solidly positive operating margins (8.5%). Fitc views this
favorably, as it further solidifies the sustainability of the
operational turnaround that has been underway since fiscal 2010.
Management continues to be actively engaged in strategic planning to
ensure that the university is able to provide a low-cost educational
option with high-quality academic outcomes going forward.
The university's ability to maintain balanced operations is also highly
contingent upon stability in its primary revenue stream -
student-generated revenues. These revenues have historically provided
71.3% of annual operating revenues (fiscal years 2009-2013). This lack
of revenue diversity is unusual among public universities, reflecting
the state of Ohio's low operating support for Miami, together with
Miami's national draw, which allows it to collect additional fees from
its large population of out-of-state students.
INCREASED BALANCE SHEET RESOURCES
Since the university's operations have been surplus-generating over the
last four fiscal years (2010-2013), its balance sheet has posted solid
gains and provides a healthy financial cushion against the university's
financial obligations. Net of unspent bond proceeds, available funds
(defined by Fitch as cash and investments not permanently restricted)
grew by 19.3%, to $431.2 million as of June 30, 2013. As compared to
fiscal 2013 operating expenses ($520 million) and total pro-forma debt
($679.1 million, which includes bonds, capital leases, and unamortized
premium), available funds represent a solid 82.9% and 63.5%,
In addition, the MU Foundation (the foundation) holds another $416.7
million of cash and investments as of June 30, 2013 in an endowment pool
for the university's benefit. MU successfully completed a comprehensive
campaign in 2013 which raised $535.7 million, roughly half of which was
for endowment support. While the endowment supports the university's
operations, endowment funds are restricted and are therefore not
included in Fitch's calculation of available funds.
STRONG OPERATING PROFILE
MU's enrollment (at the main campus in Oxford), which underpins
student-generated revenues, grew modestly by 1.2% in fall 2013.
Continued growth in undergraduate enrollment, which accounts for 86.4%
of the total, was partially offset by a decline in graduate headcount.
Enrollment stability is also bolstered by the high quality of admitted
students, which improves retention. Fitch expects a stable to modestly
growing enrollment trend going forward based on MU's strong reputation,
high demand and selectivity, and successful recruiting strategies.
MODERATELY HIGH DEBT BURDEN
Fitch continues to view the university's burden as manageable despite
increases in recent years. Pro-forma maximum annual debt service (MADS)
is estimated to reach $54.7 million (due in fiscal 2017), and will
represent 9.6% of fiscal 2013 operating revenues. While this level is
somewhat high, Fitch notes that the university's decision to utilize a
conservative debt structure, amortizing bond series in 20-25 years
rather than the standard 30 years, is the primary driver of the higher
than average burden. Income from operations provides 2.0x coverage of
pro-forma MADS. In line with similarly rated public institutions, Fitch
views this level of coverage as adequate given MU's strong operating
profile and financial flexibility.
Additional information is available at 'www.fitchratings.com'
Applicable Criteria and Related Research:
'U.S. College and University Rating Criteria', dated May 10, 2013
'Fitch Rates Miami University (OH) Revs ' AA'; Outlook Stable', dated
Oct 10, 2012.
'Fitch Rates Ohio's $300MM Higher Education GO Bonds 'AA+'; Outlook
Stable', dated Feb 27, 2014.
Applicable Criteria and Related Research:
U.S. College and University Rating Criteria
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.
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
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OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF
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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
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