Fitch Ratings affirms the City of Anderson, Indiana' $47 million economic development revenue refunding and improvement bonds, series 2007, issued by the city on behalf of Anderson University (Anderson or the university) at 'BBB-'. The Rating Outlook is Stable.
The rating is supported by a track record of surplus operating performance and fundraising, good management practices, and no plans to issue additional debt. The principal credit risks include Anderson's revenue concentration in student generated fees, softened undergraduate enrollment, an above average debt burden, and limited liquidity.
Anderson's total headcount was 2,740 in Fall 2008, with increases in graduate enrollment offsetting declines in undergraduate students. Fall 2008 full-time equivalent (FTE) students totaled 2,604, an increase of 1.4% from fall 2007 after decreasing by 4% between fall 2005 and fall 2007. Any enrollment declines that would impact Anderson's ability to collect the student revenues upon which its financial operations depend would pressure the current rating.
Anderson's long-tenured management team has a well-defined strategic plan and disciplined budgeting practices. Over the past six fiscal years, the university's operating margin has ranged from 1.0% to 13.0%. The operating margin for fiscal 2008 totaled a solid 9.5%; unrestricted revenues totaled $51.3 million. Tuition, fees and auxiliary revenues account for 77.3% of unrestricted revenues, making the university's financial results sensitive to changes in enrollment.
Anderson has been successful in its past fundraising efforts. The university launched the public phase of a $110 million capital campaign in 2006. As of Jan. 31, 2009, $60 million has been collected and there is an additional $28.5 million of pledges outstanding. Additional rating pressures could be brought to bear should fundraising falter. Despite this fundraising success, the university's liquidity remains limited. Available funds (total cash and investments net of permanently restricted net assets) totaled $15 million as of May 31, 2008. This level of available funds would cover 31% of the university's fiscal 2008 operating expenses and 27.4% of total long-term debt. However, Anderson's investment totals have been reduced by current market volatility, although the total reduction is unavailable at this time.
Outstanding long-term debt is approximately $54.9 million, including notes payable, a $3 million line of credit, and capital leases. Maximum annual debt service for the bonds totals about $3.8 million, consuming approximately 6.8% of fiscal 2008 revenues. Debt ratios are expected to remain manageable with no plans to issue additional debt.
Anderson University is a four-year Christian university of the arts, humanities, theology, and professions located in Anderson, Indiana.
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