Fitch Rates Marist College's Revs 'A'; Outlook Stable

Business Wire, Jan 16, 2008

NEW YORK -- Fitch Ratings has assigned an 'A' rating to the following new and outstanding debt issues for the Dutchess County Industrial Development Agency (issued on behalf of Marist College):

--$20 million variable-rate demand civic facility revenue bonds, series 2008A (underlying rating);

--$58.2 million outstanding variable-rate parity revenue bonds (underlying rating);

--$26.9 million outstanding fixed-rate parity revenue bonds.

The 2008A bonds are scheduled to sell competitively on or about Jan. 25. The Rating Outlook is Stable.

Proceeds of the series 2008A bonds (the bonds) will be used to finance the construction of new student townhouses and fund various costs of issuance. The bonds, which rank on parity with outstanding revenue bonds, are expected to be supported by an irrevocable, direct-pay letter of credit (LOC) to be provided by KeyBank, National Association. Fitch expects to assign long- and short-term ratings to the bonds based upon the LOC. In determining the long-term rating, Fitch will apply its methodology that considers the joint probability of the failure of both a municipal issuer and a bank LOC provider. This methodology results in a rating that is two notches higher than the stronger of the two credits if the following conditions are met: (1) both entities have a rating of 'A' or higher; (2) the transaction is structured such that payments from the municipal issuer and the bank are in the flow of funds and both entities would have to fail to perform before the bonds defaulted; and (3) the credit of the bank and the municipal issuer have a low degree of correlation. Revenue bonds represent an unsecured general obligation of the college, payable from all legally available funds.

The 'A' rating reflects Marist College's (Marist) stable enrollment trends, which have resulted in solid operating margins and healthy balance sheet liquidity; a moderate debt burden and proven fundraising capabilities. Conservative financial management and debt issuance policies, and above average student selectivity also underpin the 'A' rating. Credit concerns include Marist's concentrated revenues and low matriculation, indicative of the highly competitive environment in which Marist operates.

The Stable Rating Outlook is based on Fitch's expectation that Marist's enrollment will remain stable, leading to continued positive operating performance at or near current levels. In addition, a $75 million capital campaign, launched in October 2007, is expected to further bolster liquidity and help fund Marist's five-year, $80 million master plan. Marist's ability to complete its master plan, while maintaining manageable debt levels; generating positive operating margins; and maintaining or improving its liquidity position could have positive implications for the rating and/or outlook over time.

Fall 2007 head-count enrollment was 5,727. While down 2.6% from fall 2006, demand trends have remained stable and enrollment has grown roughly 1% on average over the past four years. Marist has above average selectivity, accepting 42% of its freshman applications in fiscal 2007. The acceptance rate was down from 49% in fiscal 2006, due mainly to a 14% increase in applications received in fiscal 2007. However, matriculation, which was consistent with prior years, remains low at 29%.

While Marist's revenue diversity is extremely limited, with tuition, fees and auxiliary revenues representing 87.5% of total unrestricted revenues, its debt burden remains manageable. With the issuance of the series 2008A bonds, MADS is expected to occur in fiscal 2010 at approximately $8.3 million. Based on fiscal 2007 income available for debt service of $30.5 million, pro-forma MADS coverage would be 3.7 times (x).

Marist has healthy balance sheet liquidity. Fiscal 2007 available funds, defined by Fitch as unrestricted and temporarily restricted cash and investments, were $145.6 million, covering total pro-forma debt of $105 million by 1.4x and total unrestricted operating expenses of $108 million by 1.3x. Liquidity is expected to strengthen through Marist's first major capital campaign, which was launched in October 2007. Proceeds of the $75 million campaign, which is expected to be completed in fiscal 2012, will be used to build financial resources and fund various projects contained in the master plan. To date, the campaign has raised approximately $43 million.

Marist is a private independent four-year liberal arts college, located in Poughkeepsie, New York. The college was founded in 1929 by the Marist Brothers.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.