MOODY'S UPGRADES NORTHWESTERN UNIVERSITY TO Aa1 FROM Aa; Strong Student Demand, Sizeable Endowment, and Well Managed Operations Cited State Review of Illinois Private Institutions Nearing Completion

Business Wire, August 15, 1995

NEW YORK--(BUSINESS WIRE)--August 15, 1995--As part of its review of private higher education and not-for profit institutions in the State of Illinois, Moody's has upgraded its rating on Northwestern University to Aa1 from Aa. This rating action affects approximately $224 million in long-term debt.

Since January, Moody's has reviewed the credit quality of seven of the ten private higher education and not-for profit institutions on which it maintains ratings in the State. The review has resulted in three upgrades and four confirmations. Those institutions upgraded are: The American Academy of Orthopedic Surgeons, to A1 from A; the Art Institute of Chicago, to A1 from A; and Northwestern. Moody's confirmed the Baa1 rating on DePaul University, the A rating on Dr. William M. Scholl College of Podiatric Medicine; the Baa1 rating on the Illinois Institute of Technology; and the A1 rating on Loyola University of Chicago. Over the next month, Moody's plans to complete its reviews of Illinois Wesleyan University, Lewis University, and the University of Chicago.

Earlier this year, Moody's conducted a review of public higher education in Illinois which resulted in one confirmation and two downgrades: the Aa rating on the University of Illinois was confirmed and Illinois State University and Southern Illinois University were downgraded from A1 to A.

Credit factors leading to the upgrade of the rating on Northwestern University include:

Strong Demand for University's Selective Programs

Continued strong demand for the University's broad range of undergraduate, graduate, and professional programs has enabled Northwestern to maintain its enrollment levels while becoming increasingly selective. Northwestern is large for a private institution, with a total enrollment in excess of 13,500 students, only half of which are students at the undergraduate level. The University's Kellogg School of Management, law program, and medical school are considered among the most prestigious in the nation and display extremely favorable demand characteristics.

Large Endowment Contributes to Overall Balance Sheet Strength

Northwestern's endowment is large at over $1.2 billion and continues to grow. A significant portion of the endowment is board-designated quasi-endowment or trust funds, the principal of which is expendable. Over the past several years, the University has made significant transfers to build up its quasi- endowment fund. Northwestern's spendable endowment funds are supplemented by significant unrestricted fund balances in the current and plant funds. While debt is moderately high, it is well-covered by the University's balance sheet assets. No significant additional borrowing is planned at this time.

Well Managed Operations Continue to Generate Significant Surpluses

The University has historically generated significant operating surpluses before non-mandatory transfers. Over the past several years, current fund operations have strengthened further, with an unrestricted surplus before non- mandatory transfers of over $25 million achieved in fiscal year 1994. The University's comparatively moderate tuition and fees contributes to its competitiveness and also provides in essence a budgetary reserve.

CONTACT: John Nelson, (212) 553-4096

Susan Fitzgerald, (212) 553-7762