DBRS Morningstar Confirms York University at A (high) with Stable Trends

DBRS Limited (DBRS Morningstar) confirmed York University’s (York or the University) Issuer Rating and Senior Unsecured Debentures rating at A (high) with Stable trends. The ratings are supported by York’s strong academic profile, improving budget results, and favourable location in the Greater Toronto Area. The University continues to experience some challenges from a constrained revenue environment, provincial policy uncertainty, and the impact of a recent labour disruption on short- and medium-term enrolment prospects.

In recent years, York’s operating performance has significantly improved, led by an enhanced financial and budget framework and growing international student revenues. The University reported an operating surplus of $164.3 million, or 13.5% of revenue, which includes $63.8 million in revenue that was deferred from the prior year related to the 2018 Canadian Union of Public Employees strike. On an adjusted basis, this equates to a surplus of $100.5 million, or 8.3% of revenue, which was ahead of the adjusted result of $86.4 million in the prior year.

For 2019–20, the operating budget projects a modest surplus of $3.8 million, though the University has indicated that actual results are likely to outperform the budget as a result of a large contingency and a continued focus on expense management by the University. The medium-term outlook has shifted as a consequence of recent policy changes with the University now planning to pursue faster growth in international enrolment and fees. The multiyear budget plan envisions a roughly balanced budget position supported by strong international enrolment growth.

York’s board of governors recently approved the construction of the Markham, Ontario, campus. Without provincial capital support, the University has indicated it will fund the project using debt, internal resources, fundraising, and contributions from the local and regional governments. The board has approved the use of $100 million in debt (form and timing to be determined), which suggests that debt per full-time equivalent is likely to rise to about $12,090 in 2019–20.

RATING DRIVERS
The ratings and rating drivers factor in the potential increase in debt. A positive rating action could occur over the medium term if operating results remain strong, supported by a resolution of the uncertainty in provincial policy and moderate enrolment growth. A negative rating action is unlikely but could result from a significant and sustained deterioration in operating results.

DBRS Morningstar notes that the above press release and related report were amended with minor changes on December 17, 2019. The amendments were non-material and would not impact the understanding of the reader.

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

The principal methodology is Rating Public Universities, which can be found on dbrs.com under Methodologies & Criteria.

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

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