Date of Release: 2010-02-08

Concordia University

DBRS Confirms Concordia University’s Long-Term Rating at "A", Stable Trend

DBRS has today confirmed the Senior Unsecured Debt rating of Concordia University (Concordia or the University) at “A” with a Stable trend. Concordia’s credit profile remains healthy as it continues to carry an affordable level of debt while exercising prudent fiscal management practices that have better positioned the University to deal with a restrictive operating environment. While Québec universities have been given modest flexibility with respect to tuition fees in recent years, notable cost inflation and limited revenue sources are expected to keep operating conditions challenging.

Concordia recorded a $2.7 million surplus in 2008-2009, a marked improvement year-over-year due primarily to cost containment measures and the absence of non-recurring salary accrual expenses. University-supported debt was slightly reduced and combined with modest enrolment growth to lower debt per full-time equivalent student (FTE) to $8,926 as of May 31, 2009, a level well manageable for the credit. However, the University’s pension balance worsened to a deficit of $97.9 million from a $3 million surplus the prior year while expendable resources fell to $3.7 million at year-end 2009 because of losses on the Concordia University Foundation (the Foundation) assets.

Concordia’s operating budget for 2009-2010 weakened modestly year-over-year to a deficit of $4.2 million. Moderate revenue growth is projected to result from higher enrolment figures, a $100 per student increase in tuition fees and larger provincial grants, but will be outpaced by expenditure growth which will be largely driven by a contingency for salary increases with regards to unsigned collective agreements. However, higher-than-forecast enrolment so far this year should translate to a balanced operating position. The capital plan includes three new projects with a value of about $70 million, with financing entirely covered by provincial and federal stimulus grants. As a result, Concordia has limited debt needs although anticipates borrowing $45 million that will be provincially-serviced debt. Endowments should rebound notably in 2009-2010 as returns improved in 2009 and the Foundation took a payout holiday, reducing endowment draws by roughly $5 million during the 2009 calendar year. While the budgeting environment has tightened due to the limited allowable tuition increases, growing salary costs and the potential pension deficiency funding, the outlook remains sound as Concordia now retains a portion of international student fees, has well-managed its funding obligation for its capital plan and has demonstrated considerable prudence in dealing with base budget cuts.

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

The applicable methodology is Rating Canadian Universities, which can be found on our website under Methodologies.

This is a Corporate (Public Finance) rating.

The full report providing additional analytical detail is available by clicking on the link below or by contacting us at info@dbrs.com.

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