Rating Action: Moody's affirms Clemson University's (SC) Aa2 and Aa3 ratings; outlook stable
New York, January 21, 2021 -- Moody's Investors Service has affirmed the Aa2 ratings on Clemson University's (SC) Higher Education Revenue Bonds and Aa3 ratings on its Athletic Facilities Revenue Bonds. The affirmations impact around $397 million of rated debt. The outlook is stable.
The affirmation of the seniormost Aa2 rating reflects Clemson's broad revenue pledge and student market momentum with operating revenue reaching $1.2 billion for the land grant university in fiscal 2020. Ongoing donor support continues to foster total cash and investment growth, which ended fiscal 2020 at $1.3 billion. The university also benefits from a growing sponsored research enterprise and close alignment with the state's economic development goals. These strengths are offset by limited state support, stiff competition for students, and sizeable pension obligations. The university faces considerable business disruption caused by the coronavirus pandemic, which is a social risk under Moody's ESG framework due to implications for public health and safety. With material support in the form of federal relief, a prudent public health response and close management of expenses, the credit impact of the pandemic should remain manageable.
The Aa3 on the athletic facilities revenue bonds incorporates the fundamental credit strength of the university, the strategic role of intercollegiate athletics as well as expectations of active management and continued adequate coverage from the limited auxiliary pledge.
The stable outlook reflects our expectations that Clemson University will continue to benefit from healthy student demand and that operating cash flow margins will remain above 12% in support of debt service commitments. The stable outlook is also predicated on expectations of manageable future borrowing and maintenance of flexible reserves.
The university's Aa2-rated broad pledge Revenue Bonds are secured by and payable from the net operating revenue of the auxiliary system, excluding athletics, plus Additional Funds designated as the gross receipts from the University Fee (total academic fee applied to all students, but not including special student fees, tuition or matriculation fees). Total net revenue without the additional funds pledged to the bonds was $32 million in fiscal 2020, providing 1.83x coverage of annual debt service. With Additional Funds of $412 million in fiscal 2020, combined coverage was 25.62x.
The Athletic Facilities Revenue Bonds are secured by and payable from the net revenue of the university's athletic department as well as a gross pledge of Admissions Fees. Pledged revenues totaled $21 million in fiscal 2020, providing 2.30x coverage of related debt service.
PROFILE
Clemson University is the land grant university for the state of South Carolina (Aaa stable), with over 25,000 headcount students enrolled in seven colleges in the northwest corner of the state. The university's main campus comprises 1,400 acres with approximately 17,000 additional acres nearby devoted to farm and woodland research. The university had operating revenue of $1.2 billion in fiscal 2020.
METHODOLOGY
The principal methodology used in these ratings was Higher Education published in May 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1175020. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Dennis Gephardt Lead Analyst Higher Education Moody's Investors Service, Inc. 7 World Trade Center 250 Greenwich Street New York 10007 US JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Susan Shaffer Additional Contact Higher Education JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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