DBRS Morningstar Confirms Ratings on University of Windsor at “A,” Stable Trends

DBRS Limited (DBRS Morningstar) confirmed its Issuer Rating and Senior Unsecured Debentures rating on the University of Windsor (UWindsor or the University) at “A” with Stable trends. The rating confirmations reflect the University’s position as an important regional institution within the Province of Ontario (the Province; rated AA (low) with a Stable trend by DBRS Morningstar), prudent financial management practices, and steady enrolment demand, which have allowed the University to mitigate the negative impacts of the Coronavirus Disease (COVID-19) pandemic on its credit profile. The challenging operating environment and some uncertainty about the direction of provincial policy remain obstacles for all public universities in the Province. In addition, relatively higher dependence on international students presents unique challenges to an institution of UWindsor’s size and academic profile.

UWindsor's year-to-date performance (2020–21) is better than budget (which was projected to be balanced), largely owing to some strength in graduate enrolment and returning international students, despite some softness in undergraduate enrolment (both domestic and international), slower first-year intake, and higher deferrals in 2020–21. Additional provincial funding and temporary government supports also provided some offset during F2021. The University's 2021–22 budget is the first budget prepared using the new activity-based budget model, and DBRS Morningstar anticipates it to be balanced owing to budget adjustments (including repurposing existing reserves) and one-time funding supports.

DBRS Morningstar believes operating pressures may persist through the near term given complicated travel and visa rules, among other pandemic-related concerns. The University has not provided any guidance on the medium-term outlook. Nevertheless, UWindsor's track record of prudent fiscal management gives DBRS Morningstar confidence that the University will continue to pursue balanced budgets.

In July 2020, the University issued $60.0 million Senior Unsecured Debentures (Series C Debentures; due September 15, 2060) to fund previously approved capital projects and replenish working capital reserves. In the absence of material new issuance, DBRS Morningstar estimates that the University's overall debt per full-time equivalent will increase to $14,594 in F2021 before gradually declining to less than $14,000 over the medium term as some debt amortizes.

RATING DRIVERS
A negative rating action could arise from a combination of materially weaker-than-projected enrolment and significantly weakened operating results leading to a sustained deterioration in financial risk metrics. A positive rating action is highly unlikely given the challenging outlook for the sector and the University’s elevated debt levels.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodology is Rating Public Universities (May 15, 2020; https://www.dbrsmorningstar.com/research/361071), which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021; https://www.dbrsmorningstar.com/research/373262).

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

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 [email protected].

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

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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