Fitch Rates DePaul University, Illinois' $50MM Revs 'A-'

Business Wire, May 19, 2008

NEW YORK -- Fitch Ratings assigns a rating of 'A-' to approximately $50 million Illinois Finance Authority (the authority) revenue bonds, series 2008, issued on behalf of DePaul University (DePaul, or the university). Fitch also affirms the long-term rating of 'A-' on DePaul's approximately $207.8 million of outstanding authority revenue bonds. The Rating Outlook is Stable. Revenue bonds are a general obligation of DePaul, payable from all legally available funds.

Bond proceeds will be used to advance refund the outstanding Illinois Educational Facilities Authority revenue bonds, series 1998C-D, series 2003A-B, and series 2003C-D bonds, effectively converting a portion of the university's off-balance-sheet financing to direct debt. The bonds are expected to price on or about June 3, 2008.

The 'A-' rating reflects DePaul's consistently positive operating margins, improved liquidity, and manageable debt burden. The primary credit concerns are the university's softening enrollment primarily due to declines in graduate demand, a competitive operating environment, and the limited geographic diversity of its student body. DePaul has generated up-trending 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. Included in this available funds figure is the university's endowment and an Institutional Reserve Fund, originally created by the university in 2006 to provide funding for unforeseen opportunities. Although the market value of DePaul's endowment and institutional reserve fund have declined since its fiscal year end to $316 million (-8%) and $94 million (-3%), respectively, the university's liquidity measurements remain solidly inline with the 'A' rating category.

DePaul's fall 2007 total headcount was 23,401, 1.1% higher than fall of 2006. Although total enrollment grew slightly, the university's freshman matriculation rate has declined 2.5% since fall 2003. In addition, total graduate and non-degree student enrollment has fallen approximately 7.2% over the same period. 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 internationalize its curriculum.

DePaul has a manageable debt burden. Pro forma long-term debt, including capital leases, mortgages, and $20 million of commercial paper issued in January 2008, equals approximately $292.2 million. Pro forma maximum annual debt service (MADS) ($26.2 million occurring in 2012) represents a moderate 6.2% of fiscal 2007 unrestricted revenues. DePaul's fiscal 2007 available funds represent 168% of total pro forma debt. The rating takes into consideration the university's planned commercial paper issuance of up to $50 million by the fall. Upon this issuance, available funds as a percentage of total pro forma debt would fall to a still manageable 143%.

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., the largest private, not-for-profit university in the Midwest, and the ninth largest in the nation.

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