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

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and Senior Unsecured Debentures rating of Trent University (Trent or the University) at “A” with Stable trends. The ratings reflect Trent’s academic profile as a primarily undergraduate university in the Province of Ontario (rated AA (low) with a Stable trend by DBRS Morningstar), ongoing enrolment growth, and a low and declining debt burden. The ratings remain constrained by the current challenging operating environment, which is characterized by constrained funding and tuition as well as visa backlogs.

In 2021–22, Trent recorded a consolidated surplus of $13.9 million (or 6.3% of revenues) as revenues across most categories increased. For 2022–23, Trent's operating budget projects a balanced position. Operating revenues are budgeted to grow by 3.2% relative to the prior year’s budget mainly driven by increased tuition revenues. Based on the fall 2022 update, enrolment remained strong, supported by international student demand and enrolment growth at the Durham Campus. Over the medium term, the University anticipates ongoing surpluses to be supported by anticipated growth in enrolment, prudent spending, and a full resumption of activities on campus.

At April 30, 2022, Trent’s long-term debt totalled $79.5 million, or $7,002 per full-time equivalent (FTE). The University has no plans for material new borrowing over the near term. As such, DBRS Morningstar expects debt-per-FTE to trend lower, falling to approximately $6,400 by 2023–24. This lower debt burden along with an enduring improvement in interest coverage and expendable resources-to-debt provide Trent with increased flexibility to withstand adverse impacts from a still-challenging operating environment.

RATING DRIVERS
A positive rating action depends on sustained improvement in financial risk assessment metrics and/or an improvement in DBRS Morningstar's assessment of one or more critical rating factors. While unlikely, a negative rating action could arise from a significant and sustained deterioration in operating results and/or from a material increase in debt.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) 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/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

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

The principal methodology applicable to the ratings is Rating Public Universities (May 5, 2022; https://www.dbrsmorningstar.com/research/396438).

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/397223/interplay-of-global-corporate-finance-rating-methodologies-when-analyzing-corporate-finance-transactions.

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.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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