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

DBRS Limited (DBRS Morningstar) confirmed the University of Windsor’s (UWindsor or the University) Issuer Rating and Senior Unsecured Debentures rating at “A,” both with Stable trends. The rating confirmations reflect the University’s position as an important regional institution within the Province of Ontario (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 current operating environment, given constrained funding and tuition frameworks, remains challenging and, along with UWindsor's modest balance sheet flexibility and higher dependence on international students, constrains the ratings.

On an operating budget basis, the 2021–22 budget projected a deficit of $3.6 million. However, UWindsor has indicated that year-to-date performance for 2021–22 has been better than budget, driven by slightly better-than-anticipated tuition revenues owing to growth in graduate enrolments, despite lower first-year intake across most faculties. The University now anticipates closer to balanced results, albeit clouded by the volatility in investment returns.

The University's 2022–23 budget (presented in April 2022) is the second budget prepared using the new activity-based budget model. UWindsor projects a balanced budget after providing for enrolment-related funding supports as well as transfers to the strategic investment and reserve fund. The University anticipates full-time equivalent (FTE) enrolment to increase by 6.0%, benefitting from higher intake decisions to address deferrals from the previous two years as well as strong demand from new applicants for its master's degree programs. Over the medium term, the University continues to plan for ongoing enrolment growth although the pace is expected to moderate. The University is currently in the process of developing a new strategic plan that is expected to be implemented by Fall 2022. DBRS Morningstar believes that the University’s operating outlook remains largely favourable and that the University will likely meet or exceed budget targets as international enrolment resumes steady growth with a relaxation in travel restrictions and given UWindsor's track record of prudent fiscal management.

At April 30, 2021, UWindsor's long-term debt totalled $238.2 million, or $14,410 per FTE. Incorporating strong enrolment growth and in the absence of material new issuance, debt per FTE is expected to be approximately $14,108 at April 30, 2022. DBRS Morningstar projects that debt per FTE will decline to less than $14,000 by 2022–23.

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
There were no environmental, social, or governance (ESG) factors that had a significant or relevant effect on the credit analysis of UWindsor.

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 5, 2021; https://www.dbrsmorningstar.com/research/377955), 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).

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@dbrsmorningstar.com.

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’s outlooks and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577