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2- Communicating with Debt Stakeholders- Kimberly Tuby

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An overview of the current investment and financing climate for higher ed and health care institutions by Kimberly Tuby of Moody's Investor Services. Part of Current Topics in Tax-Exempt Finance ...

An overview of the current investment and financing climate for higher ed and health care institutions by Kimberly Tuby of Moody's Investor Services. Part of Current Topics in Tax-Exempt Finance 10/29/2010

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    2- Communicating with Debt Stakeholders- Kimberly Tuby 2- Communicating with Debt Stakeholders- Kimberly Tuby Presentation Transcript

    • Communicating with Debt Stakeholders Mass Development Conference October 29, 2010
    • Higher Ed: Publics Rated Higher, but More Aaa Privates
      • Moody’s rates approximately 300 private colleges and universities in the U.S., with over $75.4 billion of debt outstanding.
      • More than 70% of enrollment
      • Median rating of A3
      • Moody’s currently rates 220 U.S. public colleges and universities, with over $100.9 billion of debt outstanding.
      • More than 90% of enrollment
      • Median rating of A1
    • Health Care Ratings: No Aaa’s, Long Spec Grade Tail
      • We rate ~550 not-for-profit hospitals and healthcare systems (~1,200 total hospitals)
        • Approximately $150 billion of total rated debt outstanding
        • Stand-alone hospitals (as small as 2,000 admissions)
        • Multi-state systems (with more than 400,000 admissions)
        • Median rating of A3
    • Large, highly-rated higher education and health care market has lent a degree of economic stability to the Commonwealth’s credit profile Moody's rated not-for-profit hospitals and health care organizations: Baystate Medical Center Boston Medical Center CareGroup Caritas Christi Health System HealthAlliance Hospital Children's Hospital Dana-Farber Cancer Institute Harvard Pilgrim Health Care Holyoke Hospital Home for Little Wanderers Lowell General Hospital Massachusetts Biomedical Research Corporation Massachusetts Eye & Ear Infirmary Milford Regional Medical Center New England Center for Children Newton-Wellesley Hospital Northeast Health System Partners Healthcare System Saints Medical Center South Shore Hospital SouthCoast Health System UMass Memorial HealthCare Vinfen Corporation
    • Moody's rated higher education, not-for-profit and private K-12 sector AMHERST COLLEGE MIDDLESEX SCHOOL BABSON COLLEGE MILTON ACADEMY BENTLEY UNIVERSITY MOUNT HOLYOKE COLLEGE BERKLEE COLLEGE OF MUSIC MUSEUM OF FINE ARTS BOSTON BIOMEDICAL RESEARCH INSTITUTE NEW ENGLAND CONSERVATORY BOSTON COLLEGE NORTHEASTERN UNIVERSITY BOSTON UNIVERSITY PARK SCHOOL BRANDEIS UNIVERSITY PHILLIPS ACADEMY (ANDOVER) BROOKS SCHOOL SHADY HILL SCHOOL CLARK UNIVERSITY SIMMONS COLLEGE COLLEGE OF THE HOLY CROSS SMITH COLLEGE COMB. JEWISH PHILANTHROPIES OF GREATER BOSTON SPRINGFIELD COLLEGE CONCORD ACADEMY ST. JOHN'S HIGH SCHOOL DEERFIELD ACADEMY ST. MARK'S SCHOOL DRAPER LABORATORY STONEHILL COLLEGE EMMANUEL COLLEGE SUFFOLK UNIVERSITY FRANKLIN W. OLIN COLLEGE OF ENGINEERING THE STERLING AND FRANCINE CLARK ART INSTITUTE GROTON SCHOOL TUFTS UNIVERSITY HAMPSHIRE COLLEGE UNIVERSITY OF MASSACHUSETTS BUILDING AUTH. HARVARD UNIVERSITY WELLESLEY COLLEGE ISABELLA STEWART GARDNER MUSEUM WENTWORTH INSTITUTE OF TECHNOLOGY LASELL COLLEGE WHEATON COLLEGE MASSACHUSETTS COLLEGE OF PHARMACY AND HEALTH SCIENCES WHITEHEAD INSTITUTE MASSACHUSETTS INSTITUTE OF TECHNOLOGY WILLIAMS COLLEGE MASSACHUSETTS STATE COLLEGE BUILDING AUTHORITY WILLISTON NORTHAMPTON SCHOOL MERRIMACK COLLEGE WORCESTER POLYTECHNIC INSTITUTE   WORCESTER STATE COLLEGE
    • Variety of Constituencies and “Investors”
      • Bond investors
      • Banking relationships (bank liquidity facilities, checking accounts, etc.)
      • Insurers
      • Rating agencies
      • Prospective and current students and their families
      • Donors and alumni
      • Governments (state and local appropriations)
      • Trustees
      • Faculty
      • Staff and administration
      • Surrounding community
      • Regulators
      • Accrediting agencies
    • Strategies for Ensuring Clear Communication with Your Rating Agency:
      • Proactive outreach to rating agencies with good and bad news
      • Current data in Official Statement, Appendix A, and rating agency presentations (only talking about FY 2009 during a fall 2010 rating agency meeting is not up-to-date enough)
      • Interim financial data and investment performance
      • Regular early release of annual financial statements
      • Thorough management discussion and analysis in the audit
      • Discussion of long-term strategy and capital plans to avoid surprises
      • Send presentation and other materials early enough so we can be prepared for meeting
    • Rating Agency Discussions: Student Market
      • Existing tuition discounting strategy and financial aid budget and projections for next year
      • Projections and rationale for future tuition increases
      • Win/loss data to better understand competitive landscape
      • Educational attainment and student retention data
      • Geographic diversity of student body and trends over time (for publics—limitations on drawing from out of state)
    • Rating Agency Discussions: Balance Sheet
      • Investments
          • Greater discussion of investment management and oversight
          • Manager diversification
          • Liquidity (Moody’s new liquidity ratios launched for FY 2009)
          • Unfunded commitments to private investments and projections for pace of capital calls and distributions
          • YTD investment returns
      • Debt
          • Discussion of rationale for existing debt structure
          • Clear understanding of variable-rate debt and swap agreement events of default and financial covenant calculations
    • Rating Agency Discussions: Operating Performance
      • Interim financials
      • Budget to actual YTD results, comparison to prior year
      • Future year budget assumptions (Investment returns? Endowment draw? Tuition increases? Enrollment growth?)
      • Crosswalk between internal financials and audit