DBRS Upgrades Wilfrid Laurier University to “A” with a Stable Trend

DBRS Limited (DBRS) upgraded the Issuer Rating and Senior Unsecured Debt rating of Wilfrid Laurier University (Laurier or the University) to “A” with Stable trends. The upgrade reflects (1) resolution of financial uncertainty surrounding the planned Milton campus expansion, (2) better financial results in recent years, (3) an improved budget outlook and (4) balance sheet improvement. Laurier’s business and financial risk assessments are now consistent with an “A” rating. The ratings are further supported by Laurier’s solid academic profile as a mid-sized comprehensive university located near Toronto, persistent enrolment growth and a stable revenue base.

In April 2018, the Province of Ontario (rated AA (low) with a Stable trend by DBRS) announced approval for a new Laurier campus in Milton, Ontario, a fast-growing community west of Toronto. The Province will provide a capital contribution of $90 million for a new multi-purpose building to open in 2021-22. DBRS understands that there will be no borrowing by the University for the Milton project and that the University’s contribution to the building will be from internal reserves and fundraising. The Province has committed to provide start-up funding to offset initial operating costs and new ongoing operating funding. The University expects that Milton operations will positively contribute to Laurier’s consolidated budget. Laurier projects that enrolment will grow slowly to over 2,000 full-time equivalents (FTEs) over the next decade.

The newly elected Progressive Conservative provincial government poses some uncertainty for the broader operating environment, including the potential for sector-wide cost containment. However, DBRS does not anticipate that the financial commitment and approval for the Milton campus will be rescinded. There would be no material financial impact to the University if the project does not proceed.

Operating performance in 2016-17 was positive, with the University reporting a DBRS-adjusted surplus of $6.5 million or 1.8% of revenue, an improvement from the $0.4 million adjusted surplus reported the prior year. The University reported a $9.3 million surplus, including $2.8 million in non-recurring revenue from the disposition of assets. Laurier has outperformed budget projections in recent years because of conservative budget assumptions, expense restraint and higher-than-projected enrolment, including FTE growth of 2.3% in 2016-17. DBRS expects Laurier to record a modest surplus in 2017-18, supported by FTE enrolment growth of 4.2%, and is projecting balanced operating budgets over the medium term.

Laurier’s balance sheet has improved in recent years as expendable resources have risen and debt has declined, resulting in improvement in the ratio of expendable resources-to-debt to 28% in 2016-17 from 4% in 2011-12. Debt per FTE stood at $12,916 at YE2017 and is expected to decline to approximately $11,600 through 2018-19. The debt burden should continue to fall with no planned borrowing.

RATING DRIVERS:
A positive rating action is not likely in the near to medium term, but could arise over time from further strengthening of the balance sheet, continued surplus results, stability or improvement in the operating environment and a smooth campus expansion process. A negative rating action is unlikely, but could arise from deterioration in the balance sheet because of a significant increase in the debt burden, or sustained negative operating results.

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

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrs.com.

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

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