Rating Action: Moody's affirms Loomis Chaffee School's (CT) A1 rating; outlook stableGlobal Credit Research - 21 Mar 2022New York, March 21, 2022 -- Moody's Investors Service has affirmed the A1 debt rating on Loomis Chaffee School's (CT) $21 million of outstanding debt issued through Connecticut Health and Educational Facilities Authority. The School had $64 million in outstanding debt as of 6/30/2021. The outlook is stable.RATINGS RATIONALEThe affirmation of Loomis Chaffee School's (Loomis) A1 rating is based on the school's consistently strong operating performance, with EBIDA margins averaging over 28% in fiscal 2019-2021, and excellent wealth, with total cash and investments of nearly $270 million at the end of fiscal 2021. Loomis maintains a very good brand and strategic positioning across its day and boarding school populations, evidenced by ability to meet enrollment targets, a solid yield rate of about 50%, and ability to grow student charges in line with expense growth. Liquidity is excellent at 1,073 monthly days cash on hand in fiscal 2021 providing strong operating flexibility. Offsetting credit considerations include the school's relatively high financial leverage with total adjusted debt a high 1.2x operating revenues and a complex debt structure with more than 60% of its debt privately placed, in variable rate mode and hedged with an interest rate swap, requiring careful treasury management. While the school's overall financial strategy is good, this debt structure introduces some risk.RATING OUTLOOKThe stable outlook reflects Moody's expectations of continued strong EBIDA margins, maintenance of excellent liquidity, and strong donor support. The outlook also incorporates Moody's expectations of continued healthy headroom on financial covenants.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING- Substantial growth in total wealth at a rate that outpaces peers- Greater revenue diversification driven by even stronger philanthropic supportFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING- Sustained deterioration in operating performance- Increase in debt that is not offset by growth in revenues and reservesLEGAL SECURITYThe outstanding bonds are general obligations of the school with a pledge of gross receipts and are on parity basis. The bonds are further secured by a mortgage on campus property which carries an insured value of $290M. The mortgaged facilities have not recently been appraised.The Series K-1 Bonds are variable rate demand debt which has been held in fiscal 2021 as a private placement with Webster Bank N.A.. As most of Loomis debt is in variable rate mode and hedged with an interest rate swap, this structure presents remarketing and bank concentration risk. The Series F and K-2 bonds are fixed rate, and regularly amortizing. Further, the outstanding bonds introduce liquidity risk due to multiple financial covenants, which could result in acceleration of debt if tripped, absent forbearance or a waiver. The school is required to meet financial covenants of maintaining a minimum net asset ratio of 1x, and a debt service coverage ratio of 1.25x for all outstanding bonds. The school's reported net asset ratio and annual debt coverage ratio for June 30, 2021, were 3.07x and 3.94x, respectively, providing substantial headroom above covenanted levels.PROFILEThe Loomis Chaffee School is a private, co-educational high school located in Windsor, CT. Total enrollment at the school as of Fall 2021 was 725 students with approximately 71% of students living on campus. In fiscal 2021, the school generated approximately $53 million in operating revenue.METHODOLOGYThe principal methodology used in this rating was Nonprofit Organizations (Other Than Healthcare and Higher Education) published in May 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1160889. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. 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