Fitch Rates Widener University, Pennsylvania's $34MM Revs 'A-'

Business Wire, Jan 24, 2005

NEW YORK -- The $34.0 million Pennsylvania Higher Educational Facilities Authority revenue bonds, series 2005 (Widener University) are rated 'A-' by Fitch Ratings. In addition, Fitch affirms the 'A-' rating on approximately $49.7 million of outstanding parity debt. The series 2005 bonds are scheduled to sell on a negotiated basis via Legg Mason Wood Walker Inc. on or about Feb. 2. Bond proceeds will be used to fund the construction of a new 300-bed residence hall and several other campus projects. The Rating Outlook is Stable.

The 'A-' rating reflects Widener University's (Widener, or the university) credit strengths, including steady positive annual operating performance, generally stable student demand, and competitive tuition, compared with regional peers. The Stable Outlook reflects Fitch's expectations that these credit strengths will continue and that future debt issuance will be modest. The university's operating margins have been in the range of 2.0%-3.0% for several years, with a slightly lower but still sound margin of 1.8% in fiscal 2004. While the university has been proactively reducing part-time enrollment, full-time equivalent student enrollment has increased 5.9% over the past four years, from 5,068 in fall 2000 to 5,367 in fall 2004. Widener's tuition, fees, and room and board costs have increased 32% over the past five years but are still near the median for regional private universities. Following this debt issuance, pro forma maximum annual debt service will equal a moderate 5.0% of fiscal 2004 unrestricted revenues.

Deferred maintenance is reportedly low, and future debt issuance is expected to be modest. About $17 million of the bond proceeds from this issuance will be used to construct a new residence hall to meet the growing demand for student housing given the sizable increase in full-time students at the main campus. University officials are expecting the residence hall to be at full occupancy upon completion.

Credit concerns include a heavy reliance on student charges and liquidity, which is healthy but below Fitch's median for private institutions in the 'A' category. In fiscal 2004, 87% of unrestricted revenue was derived from net tuition and fees and auxiliary revenues, reflecting Widener's need to maintain at least stable enrollment to sustain unrestricted revenues. Liquidity or available funds as measured by cash and investments that are not restricted equaled about 62% of fiscal 2004 operating expenses and 80% of pro forma debt after this issuance. The university has developed a new strategic plan, which outlines the university's goals to increase liquidity in large part through improved fundraising. According to university officials, $8.1 million was raised in fiscal 2004, making it the largest fundraising year in the university's history.

Widener serves approximately 6,700 undergraduate, graduate, and professional students at a main campus in Chester, PA, as well as campuses in Wilmington, DE and Harrisburg, PA. Widener operates Delaware's only law school, enrolling 26% of all university students, and its selectivity statistics (accepting only 38% of fall 2004 applicants) are particularly strong, with plans for further enhancements as part of the new strategic plan.