DBRS Morningstar Confirms Trent University at “A” with a Stable Trend

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and Senior Unsecured Debentures rating of Trent University (Trent or the University) at “A” with Stable trends. The ratings reflect Trent’s academic profile as a leading undergraduate university in the Province of Ontario (Ontario or the Province; rated AA (low) with a Stable trend by DBRS Morningstar), robust enrolment growth, a relatively low debt burden, and a stable revenue base. The ratings are constrained by provincial policy uncertainty and pension funding requirements that may pressure operating results, along with a low level of expendable resources and capacity constraints that are likely to limit future growth.

In 2018–19, Trent reported a consolidated surplus of $13.8 million, or 7.0% of revenues. This was down from a $14.4 million surplus recorded a year earlier but it compares favourably with many DBRS Morningstar-rated university peers. The strong results reflected enrolment growth of 7.7%, exceeding expectations as Trent continues to experience very strong enrolment gains.

For 2019–20, Trent’s operating budget (non-consolidated) forecasts a small surplus of $0.4 million, after identifying $5.5 million in budgetary measures that were necessary to offset the impact of the Province’s requirement that all post-secondary institutions reduce tuition fees for domestic students by 10%. The University’s measures focused on assessing limited-term appointments and course offerings, reducing vacant positions, reviewing non-faculty positions, finding efficiencies, and increasing revenue or cost recoveries. At mid-year, the University expects to close the year with a near balanced budget. Stronger-than-expected enrolment has offset the absence of the originally expected growth funding.

Trent has yet to produce an updated multi-year forecast, however, the University expects to remain in a balanced position over the next three years. The University continues to negotiate for enrolment growth funding but in the interim expects that continued growth in domestic and international enrolment should offset inflationary cost pressures. Trent plans to produce a multi-year budget for the coming year.

The University has no plans for material new borrowing in the near term. As a result, Trent’s debt per full-time equivalent (FTE) student is expected to fall below $8,000 in 2019–20—a low level for the assigned ratings—and to continue a gradual downward trend. Although Trent’s forthcoming housing strategy is not expected to involve material University financing, modest needs for academic and lab spaces to be redeveloped may be included as part of the project.

RATING DRIVERS
Upward pressure on the ratings could materialize over the medium term if policy uncertainty is resolved without adverse financial impacts, operating performance remains positive, and the University builds greater balance sheet flexibility in the form of expendable resources. A negative rating action could arise from a significant and sustained deterioration in operating results and/or from a material increase in debt.

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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