Fitch Ratings assigns an 'A' rating to the approximately $63.8 million of California Educational Facilities Authority (CEFA) revenue bonds (Pitzer College), series 2009. The bonds are expected to sell via negotiation on or about Oct. 21, 2009, and will finance certain capital improvement projects; refund the outstanding CEFA revenue bonds (Pitzer College), series 1999A and CEFA variable rate demand revenue bonds (Pitzer College), series 2005B; and pay various costs of issuance. At the same time, Fitch assigns an 'A' rating to CEFA's revenue bonds (Pitzer College), series 2005A bonds. All revenue bonds are on parity and represent an unsecured general obligation of Pitzer College (Pitzer). The Rating Outlook for all bonds is Stable.
The 'A' rating reflects Pitzer's strong operating margins; satisfactory balance sheet liquidity; and solid student demand as evidenced by increasingly selective admissions and increased matriculation rates. Major credit concerns include a high, though manageable, pro forma debt burden; a dependence on student-generated revenues, typical of similarly-rated private colleges and universities; and future debt issuance plans, which Fitch notes are flexible and still tentative.
Operating margins have been historically strong with positive double-digit performance since fiscal 2005, inclusive of the full payout from the endowment spending policy. Financial flexibility is further evidenced by Pitzer's available funds cushion at the end of 2008, which covered 2008 operating expenses (the most recent audited year available) by greater than 2.1 times (x), and total debt by nearly 2x. On a pro forma basis (inclusive of the series 2009 bonds), the cushion declines to 1.1x. Due to market turbulence during the last fiscal year, the 2009 cushion ratios (based on unaudited results) weakened slightly, but remain satisfactory at 1.5x expenses and 0.8x pro-forma debt. Fitch notes that exposure to alternative investments is minimal (<15%), limiting the college's liquidity risks. Improved student demand metrics also support the rating, with the acceptance rate dropping to a very selective 20% for the fall 2009 class, and the matriculation rate increasing to 30%.
Pitzer's debt burden will be high following issuance of the series 2009 bonds, with MADS of nearly $5.4 million representing almost 11% of fiscal 2008 unrestricted operating revenues. The college has plans for additional capital improvements over the next five years, and while a portion of those improvements may be debt-supported, financing plans have not been determined. Pitzer does not face any immediate capacity pressures so those plans could be revised or delayed based on future economic conditions and available financial resources. Finally, the college is heavily-dependent on student-generated revenues, which provided just over 80% of fiscal 2008 unrestricted operating revenues. This is typical for private colleges and universities at this rating level, and indicates the importance of careful enrollment management on the part of the college.
Pitzer College, founded in 1963, is an independent, undergraduate, liberal arts college in Claremont, California. The college is part of the Claremont Colleges (TCC), a group of seven affiliated, but independently managed, institutions of higher educations (five undergraduate colleges, one graduate university, and one graduate institute) that collaborate on various academic and administrative initiatives. Enrollment reached nearly 1,000 full-time equivalent (FTE) undergraduates during fiscal 2009 (year ended June 30). Future growth will be minimal as Pitzer is limited by the size of its campus (currently 34 acres), and its academic and physical infrastructure capacity.
Additional information is available at 'www.fitchratings.com'.
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. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON 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.
Contacts:
Fitch Ratings, New York
Eric Kim, 212-908-0527
Colin Walsh,
212-908-0767
or
Media Relations:
Cindy Stoller,
212-908-0526
Email: cindy.stoller@fitchratings.com