S&P Rts New Jersey Ed Fac Auth,NJ/Princeton Univ 'AAA'.
Standard & Poor's has affirmed its triple-'A' rating on debt issued for Princeton University as follows:
-- $127.84 million bonds series 1988A, 1989A, 1990A, 1991A,
1992F, 1993B, 1994A, 1995C, and 1996C, issued by New Jersey
Education Facilities Authority; and
-- $58.05 million taxable bonds series 1994 A-C, issued by
The rating reflects:
-- Stable enrollment trends and highly selective admissions;
-- A very prestigious academic reputation;
-- Considerable financial flexibility afforded by a diverse
revenue stream and substantial liquidity; and
-- A growing but manageable debt burden.
Aided by a very distinguished academic reputation, Princeton is extremely selective, and student demand remains exceptionally strong. For fall 1996, the university accepted just 14% of the over 14,300 applicants, continuing over a decade of acceptances below 18%. Between 55% and 60% of those accepted matriculate, indicating a strong preference for a Princeton education, and student quality is very high as indicated by average SAT scores of over 1360. Total enrollment hovers around 6,400, and the breakdown between undergraduate and graduate students is regularly 70%/30%. Princeton's tuition and room and board fees are quite high at just over $27,000 for fall 1996 but are in line with Princeton's competitors such as MIT, Yale, Harvard, Stanford, and Brown.
Princeton has a very diverse revenue base, with student driven tuition and fee income accounting for only 12%. The market value of Princeton's endowment now exceeds $3.5 billion or more than $546,000 per student and provides considerable financial flexibility and support. Investment income derived from endowment and other assets, represents 58% of revenues, followed by grants and contracts (15%) and gifts and pledges (7.5%). As a result of conservative budgeting and good fiscal management, the school has consistently generated substantial surpluses. In fiscal 1996, unrestricted net assets increased by $539 million resulting in a return on net assets of 15%. This kind of result has allowed for a steady accumulation of wealth. At fiscal year-end 1996, expendable resources total $4 billion providing a considerable financial cushion. The monies cover total expenses over 7 times (x) and outstanding debt by 15x. In addition, while the university's annual debt burden is relatively high at 8.3% of expenses, the debt rolls off rapidly, and debt burden relative to unrestricted resources is very light at 1.3%. The university is currently considering the issuance of roughly $120 million in commercial paper to cover the costs of capital needs over the next five years.
Chartered in 1746 as the College of New Jersey, Princeton University is one of the oldest private institutions of higher education in North America. The university is relatively small, with a total headcount of 6,444 and primarily offers undergraduate liberal arts and sciences programs. Although Princeton does not have any professional programs in business, law, or medicine, it does offer graduate programs in many disciplines, including engineering and applied science, architecture, and public and international affairs.
Historically, Princeton has maintained a relatively conservative debt stance, issuing mainly tax-exempt long-term debt up to the $150 million cap mandated by the 1986 Tax Reform Act. These issues have been relatively short (10 years) and devoid of any derivative features. In addition, in 1989, the university established a financing program with the Student Loan Marketing Association (Sallie Mae) which has allowed it to extend educational loans to parents on favorable terms. The university has, from time to time, issued taxable debt. These activities included guaranteeing a series of medium-term notes (now retired) for a wholly owned subsidiary, the Forrestal Corp., and an issuance to provide advance refunding of some tax exempt debt.
The outlook is predicated on the expectation that Princeton will continue to exhibit the exceptional demand and financial features that have made it one of the most competitive institutions of higher education in the country, Standard & Poor's said. -- CreditWire
CONTACT: Standard & Poor's Rating Services
Jennifer J Neel, 212/208-1689
Lisa Danzig, 212/208-1824
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|Date:||Jul 8, 1997|
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