Emmanuel College, MA -- Moody's affirms Baa1 rating on Emmanuel College's (MA) outstanding bonds; outlook is stable

New York, November 30, 2012 -- Moody's Investors Service has affirmed Emmanuel College's Baa1 rating. The rating applies to the college's $76 million of Series 2007 fixed-rate bonds issued through the Massachusetts Health and Educational Facilities Authority. This review has been done in conjunction with the signing of two short term loans totaling $15 million with TD Bank N.A. (Aa2 / P-1, long term rating under review for downgrade). The outlook for the rating is stable.

SUMMARY RATING RATIONALE

The Baa1 rating reflects Emmanuel's stable market position as a residential, Catholic, liberal arts and sciences college located in Boston, and consistently positive operating performance. The rating also incorporates the college's high operating and financial leverage, heavy operating reliance on student charges and highly competitive student market, as reflected by a weak matriculation rate and growth in financial aid in recent years.

STRENGTHS

*Trend of positive operating performance. FY 2012 operating cash flow margin was 21.3% providing a healthy 2.5 times debt service coverage.

*Stable market position as a residential, Catholic, liberal arts, and sciences college located in Boston. The college enrolled 2,166 full time equivalent (FTE) students in fall 2012.

*Healthy liquidity position, with limited potential calls on liquidity given fixed rate debt structure and conservative investment profile. At fiscal year-end 2012, the college reported $51.3 million of unrestricted investments that could be liquidated within one month, providing a strong 343 days of operating expenses.

*Marketable real estate in Boston, the potential value of which is not reflected in Moody's financial ratios, but is factored into the rating. While these facilities are important in supporting the college's educational activities, they could be sold over time if Emmanuel were to enter into an extended period of financial stress. The college's ability to tap these real estate holdings provides a material credit distinction from most other higher education institutions.

CHALLENGES

*Concentrated revenue base as student charges accounted for 80.8% of FY 2012 operating revenue, according to Moody's calculations.

*Highly competitive student market combined with projected decline in the number of high school graduates in North East which comprised 52% of the entering freshman class in fall 2012. The fall 2012 matriculation rate (percentage of accepted students who enroll as freshmen) remained weak at 14.1%.

*High operating and financial leverage at the current rating. The FY 2012 expendable financial resources cover outstanding pro-forma debt by 0.70 times (FY 2011 median: 1.1 times for Baa rated private colleges and universities). The FY 2011 debt to operating revenue was 1.4 times (FY 2011 median: 0.66 times).

*Limited philanthropic support as compared to similar rated peers with average gift revenue between FY 2010 and FY 2012 of $3.5 million.

Outlook

The stable outlook reflects our expectation that the college's stable market position and consistently positive operating performance will continue at least in the near term.

WHAT COULD MAKE THE RATING GO UP

Significant increase in financial resources; growth of enrollment and net tuition per student; diversification of revenue base; maintenance of current operating performance.

WHAT COULD MAKE THE RATING GO DOWN

Sustained decline in student demand and operating performance; debt issuance not accompanied by commensurate growth in financial resources; breach of debt covenants

RATING METHODOLOGY

The principal methodology used in this rating was U.S. Not-for-Profit Private and Public Higher Education published in August 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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Pranav Sharma Analyst Public Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Eva BogatyAsst Vice President - Analyst Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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