DBRS Confirms Ratings on Queen’s University at AA, Stable Trends

DBRS Limited (DBRS) confirmed the Issuer Rating and Senior Unsecured Debt rating of Queen’s University (the University or Queen’s) at AA. Both trends are Stable. The ratings reflect the University’s exceptional academic profile, strong student demand and effective management practices, which have translated into positive operating results and a strong balance sheet. The credit profile is further supported by the University’s considerable endowments.

Queen’s reported strong results for the 2017-18 fiscal year with a $74.9 million surplus and a $36.8 million increase in net assets. The strong results reflect better-than-anticipated enrolment and prudent management by faculties and shared services units, resulting in reserve accumulation.

The outlook for 2018-19 operating results remains positive and the University expects to conclude the year in line with or ahead of budget expectations.

The multi-year outlook appears challenging for Ontario universities because the revised tuition-fee framework, frozen operating grants and constrained domestic enrolment will require restraint across the sector. Among Ontario universities, Queen’s has greater budget and balance-sheet flexibility to adjust to the challenging policy environment. The University benefits from (1) exceptional demand with the capacity to shift the student mix and increase international enrolment, (2) strong management, (3) a robust balance and (4) a responsive budget model that incents faculties and shared service units to respond to the changing financial circumstances.

Queen’s does not have immediate plans for material new borrowing, though further debt issuance is possible over the medium term with the possibility of a new residence and following a review of the University’s capital priorities. In the absence of new indebtedness, the debt-to-full-time equivalent (FTE) ratio is likely to fall over the coming years to about $9,000 per FTE in 2021-22 from $10,536 in 2017-18.

RATING DRIVERS:
DBRS expects the University’s ratings to remain stable over the medium term based on its strong financial ratios and stable academic profile. A positive rating action is highly unlikely in the near term. A negative rating action could result from a significant and sustained deterioration in operating results, leading to significant balance-sheet deterioration.

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 & Criteria.

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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.

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