|[October 28, 2013]
Fitch Rates Nova Southeastern University's (FL) Rev Bonds 'BBB+'; Outlook Stable
NEW YORK --(Business Wire)--
Fitch Ratings assigns a 'BBB+' rating to the following bonds to be
issued by the Town of Davie, Florida on behalf of Nova Southeastern
--$96.75 million educational facilities revenue bonds series 2013A;
--$18.18 million educational facilities revenue refunding bonds series
The series 2013A and 2013B bonds will be sold via negotiation the week
of Nov. 18. The proceeds of the series 2013A bonds will finance or
reimburse the costs of constructing research and athletic facilities on
the university campus and the series 2013B bonds will refund the
currently outstanding series 2004A and 2004B bonds. Proceeds of the
combined series 2013A and B bonds also will be used to pay costs of
At the same time, Fitch affirms its 'BBB+' rating on the following bonds
issued by the Higher Educational Facilities Financing Authority (HEFFA)
of the State of Florida and/or the Broward County Educational Facilities
--$46 million HEFFA, series 2012A;
--$35.2 million HEFFA, series 2011;
--$99.7 million BCEFA, series 2006;
--$20 million BCEFA, series 2004B;
--$7.2 million BCEFA, series 2004A.
The Outlook is Stable.
The bonds are a general obligation of Nova Southeastern University (NSU).
KEY RATING DRIVERS
POSITIVE OPERATING MARGINS - NSU's consistent generation of positive
operating margins is a primary credit strength and anchors the 'BBB+'
rating. While modest liquidity and increasing debt levels temper the
rating, the university's operating surpluses continue to generate solid
pro forma maximum annual debt service (MADS) coverage.
MANAGEABLE DEBT - Noting a sizeable increase in university debt with the
proposed issuance, Fitch recognizes the gradual but persistent and
positive movement of NSU's debt distribution to a fixed-rate long-term
debt portfolio. This steady reduction of variable-rate debt is augmented
by the university's continued generation of operating surpluses which
cover pro forma MADS 2.8x.
MODEST LIQUIDITY LEVELS - Unrestricted cash and investments have grown
consistently over NSU's operating history but are just adequate for its
budget which is larger than most like Fitch rated universities. However,
available funds as a portion of long-term debt and expenses remain
weaker than similarly rated peers.
HEALTH PROFESSIONS DEMAND - NSU benefits from a continued demand for the
health professions; application volume for these programs continues to
grow with low selectivity and growing matriculation rates. Continued
demand for these programs remains important for the university's
operating margins and a stable credit profile.
BALANCED DEBT INCURRENCE: No significant new debt is currently planned;
however, Fitch expects any new issuance to be accompanied by a
commensurate growth in unrestricted resources available for debt
service. The inability to generate such growth could pressure the rating.
LIQUIDITY AND DEBT MANAGEMENT - Rating stability for NSU is predicated
upon maintaining unrestricted cash and investments and current debt
levels with continued generation of positive operating margins equal to
levels noted currently and adequate-to-strong MADS coverage.
Nova Southeastern University was created by the merger of Nova
University and Southeastern University of Health Sciences in 1994. NSU
is the largest independent university in Florida, with its main campus
located on 300 acres in Davie, FL. In fiscal2013, NSU had FTE
enrollment of 20,682 students and total revenues of $621.7 million.
OPERATING MARGINS REMAIN POSITIVE
The 'BBB+' rating is supported by NSU's consistent operating
performance, which generates adequate-to-strong pro forma MADS coverage,
and continued focus on health professions within program offerings which
enjoy sustained and stable demand. For fiscal 2013, NSU generated a 7%
operating margin, congruent to pro forma MADS coverage of 2.8x. The
university management team continues to budget for no less than 5%
operating margins in future fiscal years which Fitch believes will
continue to drive solid coverage metrics.
ADEQUATE LIQUIDITY METRICS
NSU's liquidity has grown year over year, and unrestricted cash and
investments, also known as available funds, totaled $227 million as of
fiscal 2013. Available funds constituted 39.3% of operating expenses and
45% of pro forma debt. While these measures are improved from fiscal
2012, NSU's unencumbered liquid assets as a percentage of operating
expenses and debt are somewhat weaker than similarly rated educational
institutions. This weakness is made up for in stable operating margins
and continued surplus generation that supports the building of a
liquidity cushion over the long term.
ENROLLMENT TRENDS STILL MIXED
NSU's enrollment trends over the past five years have reflected a
decline in overall headcount. While undergraduate headcount increased
from 2009-2011, fall 2012 showed a decline and fall 2013 enrollment is
not finalized as of yet, but expected to be somewhat weak as well. Part
of the decline can be attributed to NSU's shift in strategy and
heightened selectivity to improve student academic quality. Incoming
undergraduate students as of fall 2014 will be required to have a
minimum 3.0 grade point average. The university acknowledges that there
may be enrollment pressures due to this initiative but expects to revise
strategy as required once the results are in. At the same time, Fitch
notes favorably that the health professions division (primarily graduate
programs) continues to experience strong enrollment. With graduate FTEs
comprising 76% of the total, NSU is unlike most of its rated peers and
profitability is tied to health division programs that continue to
sustain positive demand trends through down economic cycles.
Post issuance, NSU's total outstanding long-term debt, including
non-cancellable operating leases, will total approximately $505 million.
Pro forma MADS of $31.7 million, excluding leases, constitutes 5.1% of
unrestricted operating revenue and is covered 2.8x by net available
revenue from operations. This pro forma MADS coverage and relatively low
debt burden compares favorably to similarly rated peers within Fitch's
portfolio. NSU has not articulated future debt plans or capital projects
at this time but expects to refund existing variable-rate debt as
opportunities become available. NSU's fixed-to variable-rate debt mix
has changed positively over time and variable-rate debt including an $8
million bank loan comprises about 18.6% of total long-term debt. Fitch
views management's commitment to reducing its variable-rate debt
exposure favorably. This decrease in variable rate debt enhances the
university's financial flexibility.
NEW DEBT PLANS
The proposed bond issuance funds among other projects, the building of
the 212,000 square foot Center for Collaborative Research (CCR), of
which approximately 60% will be used by the university for internal
research programs and 40% will be leased to external parties. NSU
reports healthy interest in the space and expects lease contracts to be
in place prior to the completion of the facility. The university expects
the CCR to be self-supporting once operational. The debt also funds the
building of a new gymnasium for the University School, a college
preparatory day school that provides academic programs from pre-K
through the 12th grade; the facility will accommodate growing student
demand in the current facility.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
'U.S. College and University Rating Criteria' (May 2013);
'Fitch Affirms Nova Southeastern University's Revs at 'BBB+'; Outlook
Stable (April 23, 2013).
Applicable Criteria and Related Research:
U.S. College and University Rating Criteria
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE '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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE
RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR
RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY
CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH
[ Back To Technology News's Homepage ]