DBRS Confirms Wilfrid Laurier University at A (low), Stable Trend

DBRS Limited (DBRS) has today confirmed the Issuer Rating and Senior Unsecured Debt rating of Wilfrid Laurier University (Laurier or the University) at A (low) with Stable trends. Laurier’s ratings are supported by a reasonably solid academic profile, improving budgetary flexibility and a history of solid enrolment growth. Although the operating environment remains constrained, the introduction of a new funding formula is expected to result in stable funding over the medium term, and pension payments are likely to stabilize with the introduction of a new pension solvency framework. The shift to a responsibility centre management budget model in 2017–18 should produce further efficiencies, and moderate projected enrolment gains should support continued positive operating results.

In 2015–16, Laurier reported a DBRS-adjusted consolidated surplus of $0.4 million, or 0.1% of revenue, which is significantly improved from the $12.9 million DBRS-adjusted deficit reported the prior year (3.9% of revenue). The University recorded a $1.9 million surplus on its financial statements, including non-recurring gains on the disposition of assets. The improvement in operating results in 2015–16 stemmed from strong expense control (-2.7%) amid a modest increase in revenues (+1.3%), primarily from higher student fees and grant income. Enrolment on a full-time equivalent (FTE) basis, as tracked by DBRS, rose by 0.5% year over year.

The original 2016–17 budget forecast an operating fund deficit of $7.3 million, to be offset by one-time measures. Following year-end 2017, Laurier now anticipates a modest operating fund surplus of $2.3 million, a figure likely to shift as results are finalized, supported by FTE enrolment growth of 2.3% and significant underspending on salaries and benefits. Laurier again avoided enacting the one-time budget-balancing measures. The University’s debt per FTE declined in 2015–16 on debt amortization and enrolment growth to $13,378 from $13,600 the prior year. DBRS expects that with no near-term plans for additional borrowing, the debt burden will fall to roughly $12,900 per FTE in 2016–17 and to roughly $12,500 through 2017–18.

RATING DRIVERS
DBRS is encouraged by the University’s recent operating performance, more positive budget outlook, moderate enrolment growth and rising level of expendable resources. If this progress is sustained in coming years, with continued strengthening of the balance sheet through amortization of existing debt and a rising level of expendable resources, the ratings could experience upward pressure. The key uncertainty remains the potential Milton campus development; DBRS will monitor the proposal and the capital plan for borrowing implications, the impact on Laurier’s level of expendable resources and ongoing operating costs. Although unlikely, the ratings could experience downward pressure if debt were to rise materially or if financial performance deteriorated notably as a result of weaker spending discipline, a sharp decline in enrolment-linked funding or other adverse changes in the operating environment.

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

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The principal methodology is Rating Public Universities, which can be found on dbrs.com under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.