DBRS Confirms Wilfrid Laurier University at “A” with a Stable Trend

DBRS Limited (DBRS) confirmed the Issuer Rating and Senior Unsecured Debt rating of Wilfrid Laurier University (Laurier or the University) at “A” with a Stable trend. Laurier’s ratings are supported by its academic profile, location near Toronto, persistent enrolment growth and stable revenue base. However, the ratings are constrained by the more pronounced impact that provincial policy changes will have on Laurier, given its limited operating flexibility.

Laurier reported an improved operating performance in 2017–18, with a surplus of $12.7 million, or 3.3% of revenue, compared with a $9.3 million surplus the previous year. Laurier has outperformed budget projections in recent years, owing to conservative budgeting, controlled expenses and increasing student intake. DBRS expects the University to report a surplus for 2018–19, though lower than the previous year, supported by full-time equivalent (FTE) enrolment growth of 2.4%.

In January 2019, the provincial government announced a 10% reduction in domestic tuition fees in 2019–20, to be followed by a tuition freeze in the subsequent academic year. As such, Laurier has projected a $18.4 million operating budget deficit and initiated a comprehensive financial review to identify measures to rebase the operating budget and address the structural budget gap. The University will seek to balance its operating budget over a three-year period.

The medium-term outlook will also be challenging because of ongoing provincial expenditure restraint and the uncertain outlook for the next round of Strategic Mandate Agreements.

Laurier’s balance sheet has improved in recent years, as expendable resources have risen and debt has declined, resulting in an improved ratio of expendable resources-to-debt of 37.1% at YE2018 from 2.6% in 2011–12. Debt per FTE stood at $11,993 at YE2018 and is expected to decline to approximately $11,500 in 2019–20. The debt burden should continue to fall to below $11,000, given that there is no planned borrowing over the next few years.

RATING DRIVERS:

Following last year’s upgrade, a positive rating action is not likely in the near term given the challenging outlook for Laurier and the sector more generally. A negative rating action could result from a sharp increase in debt levels, persistent operating losses or drastic and adverse changes in government funding policies.

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 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 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 [email protected].

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

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