Morningstar DBRS Confirms Trent University's Issuer Rating and Senior Unsecured Debentures at "A" With Stable Trends

DBRS Limited (Morningstar DBRS) confirmed Trent University's (Trent or the University) Issuer Rating and Senior Unsecured Debentures credit rating at "A" with Stable trends.

KEY CREDIT RATING CONSIDERATIONS
The credit ratings reflect Trent's academic profile as a primarily undergraduate university in the Province of Ontario (rated AA with a Stable trend by Morningstar DBRS), a low and declining debt burden, and improved operating performance. The credit ratings remain constrained by the current challenging operating environment, which is characterized by the constrained funding and tuition framework and the potential slowdown in enrolment following federal changes to immigration policy affecting international student study permits.

In 2023-24, Trent recorded a consolidated surplus of $45.9 million, or 15.4% of revenues, as revenues increased across most categories. For 2024-25, Trent's operating budget projects a balanced position; however, a softer enrolment outlook could necessitate the use of available reserves and budget adjustments to offset revenue losses. Over the medium term, the University is actively working to maintain a balanced budget through relatively stable enrolment, use of available reserves, prudent spending and strategic investments.

At April 30, 2024, Trent's long-term debt totalled $79.4 million, or $5,982 per full-time equivalent (FTE). The University indicated no plans for material new borrowing. While a drop in enrolment will result in a higher, albeit manageable, debt-per-FTE ratio, Morningstar DBRS believes that the improved interest coverage and expendable resources-to-debt ratios should allow Trent increased financial flexibility within the current credit rating category.

CREDIT RATING DRIVERS
A positive credit rating action is possible if financial risk assessment metrics do not materially deteriorate from current levels over the next 12 to 18 months despite a broadly challenging operating environment. While unlikely, Morningstar DBRS could take a negative credit rating action if there is a significant and sustained deterioration in operating results or a material increase in debt.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) at https://dbrs.morningstar.com/research/437781.

CRITICAL RATING FACTORS (CRFs) AND FINANCIAL RISK ASSESSMENT (FRA)

(A) Weighting of CRFs
In the analysis of Trent, the CRFs were considered in the order of importance contemplated in the methodology.

(B) Weighting of FRA Factors
In the analysis of Trent, the FRA factors were considered in the order of importance contemplated in the methodology.

(C) Weighting of the CRFs and the FRA
In the analysis of Trent, the CRFs carry greater weight than the FRA.

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

Morningstar DBRS applied the following principal methodology:
-- Rating Public Universities (September 6, 2024), https://dbrs.morningstar.com/research/439045

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (April 15, 2024; https://dbrs.morningstar.com/research/431186) which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodology has also been applied:
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024), https://dbrs.morningstar.com/research/437781.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

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@morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

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

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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