Fitch Affirms DePaul University Revs at 'A-'

Business Wire, Feb 1, 2008

NEW YORK -- Fitch Ratings affirms the long-term rating of 'A-' on approximately $207.8 million of outstanding Illinois Finance Authority revenue bonds, issued on behalf of DePaul University (DePaul). The revenue bonds are a general obligation of DePaul, payable from all legally available funds. The Rating Outlook is Stable.

The 'A-' rating is primarily supported by DePaul's consistently positive and uptrending operating margins, improved liquidity, and manageable debt burden. The primary credit concerns are the university's soft student demand, the limited geographic diversity of its student body, and a competitive operating environment. DePaul has generated positive operating margins for the past five fiscal years. The operating margin for fiscal 2007 was 12.3%, up from 10.3% in fiscal 2006. The university is achieving its goal of building financial flexibility, growing its available funds to $491 million in fiscal 2007, a 30% increase over fiscal 2006. A portion of its available funds is a $97 million Institutional Reserve Fund, created in 2006 to provide funding for unforeseen opportunities. Fall 2007 total enrollment of 23,401 was 1.1% higher than fall of 2006. Although enrollment grew slightly in fall 2007, matriculation rates for freshmen declined to 31.9% from 34.7% in fall 2006. To increase enrollment, DePaul has put into operation its Strategic Enrollment Plan with the goal of invigorating its transfer student population numbers. It has also made a strategic commitment to internationalizing its curriculum.

The Stable Outlook reflects expectations that DePaul will continue to generate positive operations, build liquidity, and fortify matriculation rates. Fitch expects management to align future plans for debt issuance and capital spending with available resources.

DePaul currently has a manageable debt burden. In fiscal 2007 total long-term debt, including capital leases, mortgages and a new commercial paper program, equaled $260 million. Current maximum annual debt service (MADS) ($23 million occurring in 2009) represents a moderate 5.55% of unrestricted revenues. The rating affirmation takes into consideration the university's planned debt issuance of up to $100 million in the fall, half of which will be used to convert a portion of the university's off-balance-sheet financing to direct debt. In fiscal 2007, DePaul's available funds as a percentage of total debt increased to 189% from 169% in fiscal 2006, and 119% in fiscal 2005. Following the planned issuance in the fall, this ratio would fall to 136.5%.

DePaul University is a coeducational urban institution, offering a full catalogue of undergraduate, graduate, and professional programs. Founded in 1898, DePaul is the largest Catholic institution in the U.S. and the largest private, not-for-profit university in the Midwest.

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