OREANDA-NEWS. Fitch Ratings has affirmed its 'BBB+' rating on the outstanding $21.015 million series 2015 Missouri Health and Educational Facilities Authority educational facilities revenue bonds, issued on behalf of Maryville University of Saint Louis (Maryville).

The Rating Outlook is Stable.

SECURITY

The bonds are secured by a mortgage and security interest in Maryville's campus property and its unrestricted receivables (UR). UR includes all unrestricted revenue, tuition and unrestricted gifts and is equivalent to a general obligation of the university. The bonds have a fully funded debt service reserve.

KEY RATING DRIVERS

STRONG FINANCIAL OPERATIONS: The university continued positive operating margins in fiscal 2015, supported by enrollment growth and expense management. The fiscal 2015 operating margin was solid at 6.2%, and management projects similar results for fiscal 2016.

ENROLLMENT AND NET TUITION REVENUE GROWTH: FTE enrollment increased about 7% to 3,813 in fall 2015, continuing a growth trend from new on-line and graduate programs. Full-time undergraduate enrollment is stable. Net tuition revenue has increased in each of the last five fiscal years.

ADEQUATE BALANCE SHEET: Maryville's fiscal 2015 balance sheet ratios are consistent with those of peer 'BBB+' private universities rated by Fitch. Available funds were 85% of expenses and 87% of debt.

MODERATELY HIGH DEBT BURDEN: The university's MADS burden is moderately high but manageable. Strong operating results, pro forma MADS coverage and limited additional debt plans are partially mitigating factors.

RATING SENSITIVITIES

ENROLLMENT SUPPORTS OPERATIONS: The rating assumes stable to modest enrollment increases at Maryville University of St. Louis, Missouri that will support growth in net tuition revenue and positive operating margins. However, revenues remain highly dependent on student revenues, making the university vulnerable to enrollment shifts.

BALANCE SHEET STABLE: Significant reduction of Maryville's balance sheet ratios relative to either debt or expenses could cause a negative rating action.

CREDIT PROFILE
Maryville is a non-profit private university affiliated with the Religious of the Sacred Heart. The institution was established in St. Louis in 1872, moved to suburban St. Louis County in 1961, and converted to university status in 1991. The main campus is located about 22 miles from St. Louis, and the university also leases academic space for evening and non-traditional programs.

ENROLLMENT DRIVES OPERATIONS
FTE enrollment in fall 2015 was 3,813, up roughly 50% from fall 2010. Growth has primarily come from the graduate and non-traditional programs, including on-line and professional offerings. Traditional undergraduate enrollment has been fairly stable over time at around 2,200 FTE students. Maryville is historically a commuter institution, with a mix of full-time and part-time students. Over the last eight years, though, undergraduate enrollment has become more residential.

The college of health sciences enrolls the largest proportion of students, about 64% of FTE enrollment. Undergraduate and graduate programs include nursing, occupational therapy, physical therapy, speech and language pathology, and healthcare practice management. Among its online programs, the college offers various advanced practice nursing programs.

POSITIVE OPERATING PERFORMANCE
Maryville's operations are heavily reliant on student-generated revenues, typically over 90%, which is similar to other liberal arts colleges. In recent years GAAP operating results have been strong. Operating margins were 6.2% in fiscal 2015, 6.4% in 2014, and 4.4% in 2013. Similar results are projected for the fiscal year ending May 31, 2016.

Net tuition revenue increased in each of the last five years, with another increase projected for fiscal 2016. Revenue growth has been driven largely by graduate and on-line enrollment. The university budgets conservatively; budgets include depreciation expense, conservative enrollment assumptions, and various expense contingencies.

Maryville has posted sound annual debt service coverage for the last six years, including 2.4x in fiscal 2015 (adjusted by Fitch to exclude a debt pay-off from gifts). MADS ($5.6 million in 2031) provided solid 2.0x coverage in fiscal 2015.

ADEQUATE AVAILABLE FUNDS
Available funds (AF), defined by Fitch as cash and investments less permanently restricted net assets, have increased modestly in recent years, at the same time the university has invested in various capital improvements using gifts and internal revenues. AF was $59 million in fiscal 2015, up from $55 million in 2014. This calculation includes quasi endowment (about $32 million), but not restricted endowment (about $13 million).

Fiscal 2015 AF was 85% of expenses and 87% of debt (about $68 million). These ratios as consistent with peer Fitch-rated private colleges and universities.

DEBT BURDEN ABOVE AVERAGE BUT MANAGEABLE
MADS is $5.6 million in 2031 due to a double-maturity; this amount will decrease slightly when the series 2006 refunding becomes effective in calendar 2017. Before the 2031 MADS date, however, annual debt service is closer to $4.4 million.

MADS represented a moderately high 7.5% of fiscal 2015 operating revenues. The more typical annual debt service of $4.4 million is more moderate at 6%. Fitch considers the university's debt burden to be mitigated in part by strong operating margins and pro forma debt service coverage.

In 2015 the university refunded its fixed-rate series 2006 bonds in a fixed-rate private placement. The pricing is locked in but does not become effective until 2017, at the time of the series 2006 call date. The private placement is on parity with the series 2015 bonds and management confirms there are no additional bond covenants. The university does not expect to issue additional debt at this time.

BOND SECURITY
The series 2015 bonds are on parity with outstanding debt, secured under a Master Trust Indenture. Outstanding debt, including some leases but excluding the forward refunding, is about $68 million. Bond covenants include a 1.lx annual debt service coverage covenant, an additional bonds test of two-year historical net income covering pro forma debt service by 1.2x, and a liquidity covenant of 65%. Additionally, the series 2015 bonds have a debt service reserve.

When the forward refunding of the series 2006 bonds becomes effective in calendar 2017, a liquidity escalation provision required by a bond insurance policy will be eliminated. The escalation would have started in fiscal 2018, building by 5% annually from 65% until 100% is achieved.

University bonds are fixed rate with the exception of the privately placed $13.74 million series 2010 variable rate bonds (about 21% of debt is variable rate). The series 2010 bonds are also issued under the Master Trust Indenture, and have a variable-to-fixed rate swap contract through 2022 (no collateral posting is required). The bond's variable index rate is fixed through March 2017, at which time a mandatory index tender is possible. Fitch views Maryville as having sufficient liquidity (AF of $59 million in fiscal 2015) relative to a potential put of about $12 million at that time.