Morningstar DBRS Confirms University of Windsor at "A" With Stable Trends

DBRS Limited (Morningstar DBRS) confirmed both the Issuer Rating and Senior Unsecured Debentures credit rating of the University of Windsor (UWindsor or the University) at "A" with Stable trends.

KEY CREDIT RATING CONSIDERATIONS
The credit ratings reflect the University's position as an important regional institution within the Province of Ontario (Ontario or the Province; rated AA with a Stable trend). The credit ratings remain constrained by the challenging operating environment, which can be characterized by the restrictive funding and tuition framework, and recent changes to federal immigration policy that are negatively affecting international student enrolment. Furthermore, UWindsor demonstrates an above-average dependence on international student enrolment. Despite these challenges, Morningstar DBRS acknowledges that University has been able to weather the challenging operating environment, supported by its prudent fiscal management practices, steady enrolment demand, and modest, albeit improving, balance sheet flexibility.

CREDIT RATING DRIVERS
At the current rating category, a downgrade is not contemplated as there is flexibility to withstand some deterioration in the operating outlook, although downward pressures could arise from a combination of materially weaker-than-projected enrolments and significantly weakened operating results, leading to a sustained deterioration in financial risk metrics. A positive rating action is unlikely given the challenging outlook for the sector and the University's elevated debt levels.

CREDIT RATING RATIONALE
On an operating basis, the 2024-25 budget projected an operating deficit; however, the University has indicated that year-to-date performance is expected to be balanced, driven by Provincial funding supports. The University's 2025-26 budget projects an operating budget deficit of $4.7 million, driven by further softening in international enrolment. The budget shortfall will be offset through a range of budget-balancing strategies, such as by finding cost savings. Alongside these efforts, the University has also chosen to pause its activity-based budget allocation method and move to a zero-based budgeting approach over the next two years to create flexibility to realign and streamline expenditure budgets. The University is budgeting a decline of 3.9% in full-time equivalent (FTE) enrolment for 2025-26, reflecting lower (-20.3%) graduate enrolment expected to be partly offset by growth (+1.7%) in undergraduate enrolment. Over the medium term, the University expects enrolment to stay soft, growing at a modest average of 1.2% over the next two years, somewhat supported by efforts to grow domestic enrolment. The budget continues to provide for the enrolment contingency reserve fund as well as the strategic investment and reserve fund.

At April 30, 2024, UWindsor's long-term debt totalled $226.4 million, or $12,829 per FTE student. In the absence of material new issuance, Morningstar DBRS projects that debt per FTE student will approach close to $13,000 by 2027-28, a slower reduction than previously anticipated because of the weaker enrolment outlook.

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) https://dbrs.morningstar.com/research/437781.

CRITICAL RATING FACTORS (CRFs) AND FINANCIAL RISK ASSESSMENT (FRA)
(A) Weighting of CRFs
In the analysis of UWindsor, the CRFs were considered in the order of importance contemplated in the methodology.

(B) Weighting of FRA Factors
In the analysis of UWindsor, 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 UWindsor, the CRFs carry greater weight than the FRA.

Morningstar DBRS notes this press release was amended on April 29, 2025, to include information on solicitation status.

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 (February 3, 2025; https://dbrs.morningstar.com/research/447186), 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.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

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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