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. Rising enrolment has contributed to a sustainable operating position and, combined with efforts currently underway to improve university governance, adds support to the credit profile. In addition, capital needs are expected to be manageable, helping to ensure that Concordia’s debt burden remains affordable within the current rating.

In 2010-2011, Concordia recorded a consolidated surplus of $8.8 million, or 1.9% of total revenues. DBRS notes that the University changed its fiscal year-end to April 30 from May 31 in 2010-2011, and as such, financial results reflect an 11-month year, making year-over-year comparisons less meaningful. Growth in revenues was supported by a solid 2.9% increase in enrolment while spending was down, year over year, in large part due to the shortened fiscal year. University-supported debt was down slightly, helping to reduce debt per full-time equivalent (FTE) student to $8,765 from $9,165 a year earlier. While pension contributions are expected to remain elevated, unfunded liabilities actually declined in 2010-2011 as a result of a favourable asset valuation and stable discount rate.

Based on the 2011-2012 budget, a balanced operating position is projected after accounting for contributions to pension plans and other capital and unfunded liabilities. Estimated enrolment growth of 1.6% along with somewhat higher tuition fees and provincial operating grants will add support to revenues while only modest expenditure growth is forecast. DBRS notes that some uncertainty exists regarding wage and salary costs as collective agreements with management and professional staff expired and have yet to be renewed.

Concordia’s multi-year budget points to a near-balanced position in both 2012-2013 and 2013-2014 as rising tuition fees and enrolment growth should help revenues keep pace with spending, provided new collective bargaining agreements are settled within budget provisions. Capital and debt needs remain modest although Concordia is evaluating the possibility of other capital projects, which could include potential building acquisitions for additional academic space. DBRS estimates that this could boost university-supported debt to almost $10,000 per FTE – a level considered acceptable for the current rating.

DBRS remains comfortable with the current rating given the University’s intention to maintain a balanced operating position and limited debt needs. Furthermore, efforts to enhance university governance add credibility to the operating and management framework and should support the continuation of a sound academic and financial profile.

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.