Fitch Ratings Assigns 'AA-' to College of the Holy Cross

Business Wire, Feb 17, 2006

NEW YORK -- Fitch Ratings assigns an 'AA-' rating on $65 million Massachusetts Development Finance Agency floating-rate revenue bonds, College of the Holy Cross 2006 issue (Auction Rate Securities), issued on behalf of College of the Holy Cross (Holy Cross). The bonds are expected to be insured by Ambac and sold through negotiation by Banc of America Securities LLC on or about Feb. 28. Bond proceeds will be used to refund the college's 1996 bonds. The Rating Outlook is Stable.

The 'AA-' rating and Stable Outlook are based on Holy Cross's stable enrollment, substantial liquidity, consistent operating performance and experienced, professional management. The headcount enrollment for fall 2005 of 2,816 is 2.6% higher than fall 2004. Liquidity, as measured by unrestricted and temporarily restricted cash and investments, continues to be substantial at $406.1 million for fiscal 2005 compared with unrestricted expenses of $113.4 million and outstanding debt of $126.0 million. For fiscal years 2002-2005, the operating margins, ranging from 1.1% to 3.3%, were positive when using the college's endowment spending policy distribution. Fitch believes that the financial strength and stability of Holy Cross is largely due to the experienced management team coupled with integrated, comprehensive planning that provides a framework for adjusting in a timely manner to changes in economic conditions, student demand and facility needs. Exemplifying the college's planning process is the 2007-2011 strategic plan. This comprehensive plan addresses, among other issues, faculty compensation, student demographics, capital needs and endowment spending.

The major concerns are the significant debt burden and implementation of the 2007-2011 strategic plan. Maximum annual debt service (MADS) would represent a use of approximately 6.8% of fiscal 2005 unrestricted revenues. With approximately 72.8% of unrestricted revenues being derived from tuition and fees, any significant decline in enrollment could affect the college's ability to repay the debt if operating expenses could not be reduced to offset the decline in revenues. The strategic plan will likely pressure the college's finances over the next couple of years; however, the college's substantial level of liquidity provides a more than sufficient cushion to absorb any deterioration in operating performance.

Founded in 1843 as a Jesuit liberal arts college, Holy Cross is located on 174 acres in Worcester, MA and is exclusively undergraduates. Holy Cross's endowment at the end of fiscal 2005 was $465 million and the college currently has a $175 million capital campaign underway. The campaign is scheduled to end June 30 and has already surpassed the goal.

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