Press Release

DBRS Morningstar Confirms Wilfrid Laurier University at “A,” Stable Trend

Universities
August 26, 2022

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and Senior Unsecured Debt rating of Wilfrid Laurier University (Laurier or the University) at "A" with Stable trends. Laurier’s ratings are supported by its academic profile, location near Toronto, steady enrolment growth in recent years, and stable revenue base. The current operating environment, given constrained funding and tuition frameworks, remains a challenge for all Province of Ontario (rated AA (low) with a Stable trend by DBRS Morningstar) universities. Additionally, Laurier has limited operating flexibility as it seeks to eliminate prior operating budget deficits, which further constrains its ratings. However, the University has implemented budgetary policies over the last few years to replenish its reserves over the long term.

For 2021–22, the University had previously budgeted a deficit of $2.9 million; however, management has indicated that performance is expected to be relatively better than initially budgeted with results being closer to balanced, if not a small surplus, despite contributions to the strategic reserve fund. The better-than-anticipated performance is expected to be driven by the improved outlook for ancillary services, enrolment growth, and ongoing cost-containment initiatives.

The 2022–23 budget projects a surplus of $2.1 million before transfers to the operating and financial sustainability reserves. The University expects full-time equivalent (FTE) enrolment to rise by 4.2% during the year, reflecting strong growth in undergraduate domestic enrolments as well as some increases from undergraduate international enrolments. With a return to campus and increased campus activity, the University expects to post an ancillary surplus of $4.1 million in 2022–23 compared with the $11.3 million budgeted deficit in 2021–22, which provides further upside to the operating outlook. The University continues to explore opportunities to improve cost efficiency and generate additional revenues.

Laurier reported total debt of $211.9 million at YE2021, down from $215.3 million the prior year as existing debt further amortizes. Although Laurier has not issued more debt over the past year, debt issuance will likely be considered if required as the Milton campus progresses over the long term. Based on Laurier's latest enrolment forecast and debt amortization, and assuming no debt issuance, DBRS Morningstar projects that debt per FTE will decline to slightly below $9,500 by F2023 from $10,200 at YE2022, in line with DBRS Morningstar’s prior expectations.

DBRS Morningstar does not expect the ratings to shift materially given Laurier's current financial risk metrics and the challenging operating environment. However, a reduction in the overlay factor for operating flexibility could occur if the University is able to demonstrate a surplus position on a sustained basis and continues to replenish reserves along with the absence of material new debt for the Milton campus. Conversely, a negative rating action could result from large and sustained operating losses, a sharp increase in debt levels, or materially adverse changes in government funding policies.

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

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/396929.

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

The principal methodology is Rating Public Universities (May 5, 2022; https://www.dbrsmorningstar.com/research/396438), 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 (May 17, 2022; https://www.dbrsmorningstar.com/research/396929).

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.

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

DBRS Morningstar will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrsmorningstar.com.

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

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