2008-06-14 00:42:25 -

- Fitch Ratings assigns an 'AAA'/'F1+' rating to the approximately $125,000,000 Illinois Finance Authority adjustable rate revenue bonds, Northwestern University, series 2008 A, B, & C. The bonds are scheduled to sell on or about June 24 via negotiation. Fitch also affirms the 'AAA' rating on Northwestern University's (Northwestern) approximately $348.2 million of outstanding fixed-rate revenue bonds; the 'AAA'/'F1+' on approximately $135.8 million of outstanding variable-rate revenue bonds; and the 'F1+' rating on the university's $200 million taxable commercial paper program. The Rating Outlook is Stable.

Bond proceeds will be used to finance capital plan projects, and to pay various costs of issuance. Revenue bonds are an unsecured general obligation of the university, payable from all legally available funds.

The 'AAA' rating is supported by the university's solid student demand, significant balance sheet resources, positive operating margins, revenue diversity, demonstrated fundraising history, and experienced management team. Credit risks are minimal. Fall 2007 enrollment based on full time equivalents was 15,003 and has grown modestly since fall 2003, as reflected by a 2.3% average annual growth rate. Fall 2007 freshman undergraduate applications increased 19.3% from fall 2006 to 21,930. The fall 2007 acceptance rate was 26.8% and the matriculation rate was 33.7%. Approximately 46% of the students are graduate students.

The university's solid demand trends and diverse revenue base have contributed to its consistently positive operating margin. For fiscal 2007, the operating margin was 10.5%. Student generated revenues, which include tuition, fees and auxiliary revenue, are the largest funding source for the university. Other major funding sources include grants and contracts, and investment income, representing 24.3% and 17.1% of unrestricted revenues, respectively.

Fiscal 2007 available funds, defined by Fitch as unrestricted and temporarily restricted cash and investments, were $5.8 billion, up from $4.6 billion in fiscal 2006. For fiscal 2007, available funds covered operating expenses ($1.4 billion) and pro forma debt ($736 million) by an impressive 4.3 times (x) and 7.9x, respectively. As of April 30, 2008, the market value of Northwestern's long-term endowment was $7.3 billion. Endowment growth over the past few years has been driven by positive investment returns and contributions. The university's endowment growth, stability of operating performance, and disciplined capital planning are reflective of Northwestern's experienced management team.

The 'F1+' rating is supported by Northwestern's own internal liquidity, consisting of unrestricted and highly liquid investments. The university's liquid investment pool would be able to cover the $135.8 million of outstanding variable-rate bonds, currently in weekly reset mode; the $125 million of series 2008 variable-rate bonds; and the full $200 million of authorized commercial paper by at least 1.25x, which is in accordance with Fitch's guidelines for variable-rate debt issued with internal liquidity. Furthermore, the university limits the amount of commercial paper maturing on any given day to $50 million.

Northwestern University is a highly selective private four-year university with campuses in Evanston and Chicago.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

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Douglas J. Kilcommons, +1-212-908-0740
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