DBRS Confirms Concordia University at “A”, Stable Trend

DBRS has today confirmed the Senior Unsecured Debt rating of Concordia University (Concordia or the University) at “A” with a Stable Trend. The University’s credit profile continues to be supported by rising enrolment, an affordable debt burden with no unfunded capital needs and improving fiscal management practices that should help manage expenditures within a difficult operating environment.

Excluding contributions to a reserve set aside for future pay-equity settlements, Concordia recorded a deficit of $1.8 million in 2009-2010, or 0.4% of total revenues. This marks a significant deterioration from the prior year’s surplus, reflecting fairly limited revenue growth in a still-rising cost environment. University-supported debt was slightly higher at $238.5 million although rising enrolment limited the increase in debt per full-time equivalent (FTE) student to $9,165 from $8,926 in 2008-2009. At this level, the University’s debt burden is roughly in-line with that of similarly rated peers and should be manageable for the credit. Pension obligations could pose a challenge however, as unfunded liabilities grew to $159.6 million, up from a deficit of $84.1 million in 2008-2009. Expendable resources rose to $9.8 million because of gains on Concordia University Foundation (the Foundation) assets, but have yet to fully recover from the downturn in financial markets.

Based on the 2010-2011 operating budget, the University is projecting a small surplus and early indications suggest Concordia will achieve this target. Rising enrolment, modestly higher tuition fees and continued growth in provincial grants will boost revenues while rising salary costs and strategic investments in administrative systems are likely to provide a partial offset. Limited University-supported debt needs and the establishment of a sinking fund supports a manageable debt profile while a move to Canadian GAAP reporting and multi-year budget cycle is helping to improve financial management and transparency.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Canadian Universities, which can be found on our website under Methodologies.