University of Alabama in Huntsville Revenue Bond Rating Outlook Revised To Positive On Enrollment Growth

Stocks and Financial Services Press Releases Wednesday February 28, 2018 10:12
SAN FRANCISCO--28 Feb--S&P Global Ratings

SAN FRANCISCO (S&P Global Ratings) Feb. 27, 2018--S&P Global Ratings revised its outlook to positive from stable and affirmed its 'A+' long-term rating and underlying rating (SPUR) on The University of Alabama in Huntsville's (UAH) existing general fee revenue bonds and student housing general fee revenue bonds. At the same time, S&P Global Ratings assigned its 'A+' long-term rating, with a positive outlook, to The University of Alabama Board of Trustees ' series 2018 general fee revenue bonds, issued for UAH.

UAH will be issuing $33.3 million in series 2018 bonds to construct a 400-unit residence hall on campus.

"The positive outlook reflects our expectation that enrollment will continue to grow at a rapid pace without sacrificing student quality, that operating margins will remain positive, and that after reimbursing itself for a portion of the cost of construction on the Charger Village II residence hall, financial resources will be adequate for the rating category," said S&P Global Ratings credit analyst Phillip Pena.

We assessed UAH's enterprise profile as very strong, characterized by a trend of significant enrollment growth over the past three years, strong student quality relative to that of peers, good retention, and a stable management team. We assessed UAH's financial profile as very strong, with a second year of positive operating margins; a moderate debt load; solid, though softening, financial resources; and a concentrated revenue base with a relatively high degree of dependence on research activity that leaves it potentially vulnerable to revenue volatility. Combined, the enterprise profile and the financial profile lead to an indicative standalone credit rating of 'aa-'. As our criteria indicate, the final ratings can be within one notch of the indicative credit level. In our opinion, the 'A+' ratings better reflect UAH's more limited student draw relative to that of higher-rated peer institutions.

The positive outlook reflects S&P Global Ratings' anticipation that, during the next two years, UAH will continue to grow enrollment, though possibly at lower levels than in the previous three years. We also expect that UAH will maintain positive operations on a full-accrual basis, and will successfully grow financial resources after reimbursing itself for a portion of the cost of constructing the Charger Village II residence hall.

We could consider a positive rating action if UAH were to achieve material growth in financial resources, as well as maintain positive full-accrual operating surpluses and enrollment growth. We would expect that any additional debt would be met with commensurate growth in financial resources. We would also expect that enrollment, demand, and retention metrics remain sound for the rating category.

We could consider a negative rating action if UAH achieved substantial full-accrual operating deficits or faced substantial reductions in federal research revenue. We could also consider a negative rating action if financial resource ratios decline significantly, if new debt is issued without commensurate growth in financial resources, or if enrollment and demand weaken significantly.

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on the S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.


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