Dormitory Authority of the State of New York -- Moody's affirms Cornell University, NY's Aa1 ratings; outlook stable

Rating Action: Moody's affirms Cornell University, NY's Aa1 ratings; outlook stableGlobal Credit Research - 15 Aug 2022New York, August 15, 2022 -- Moody's Investors Service has affirmed Cornell University, NY's Aa1 issuer and long term revenue bond ratings. Moody's has also affirmed the P-1 rating on the university's tax-exempt and taxable commercial paper program. We have also affirmed the Aa1/VMIG 1 ratings on the university's variable rate revenue bonds. Debt outstanding was approximately $1.9 billion as of June 30, 2021. The outlook is stable.RATINGS RATIONALECornell University's Aa1 issuer rating incorporates superior student market strength as a highly selective university with national and global draw, which underpins its exceptional brand and strategic positioning. Considerable philanthropic support and strong investment returns have driven wealth that amounts to over $11 billion. Cornell's renowned and sizeable research activities, bolstered by its medical school and healthcare affiliations, show strong growth, and along with its publicly funded land grant colleges, underpin its strong operating environment. Diverse revenue sources, including operating support from the State of New York for its land grant colleges, contribute to stable operating performance. Tempering these strengths is exposure to patient care income for about one quarter of revenues, thinner operating performance than similarly rated peers and ongoing capital needs. Total cash and investments cover operating expenses by around 2.5x, a sound buffer but lower relative to peers. With diverse sources of capital funding, the university's financial leverage will remain manageable but has risen in recent years to meet capital needs. Proforma debt to operating revenue is just over 0.4x and in line with peers whereas total cash and investments to total adjusted debt at 4.3x is favorable but below peers.The affirmation of the Aa1 ratings on revenue bonds reflect the issuer rating and the unsecured general obligation to pay the debt. The affirmation of the VMIG 1 ratings on the Series 2019B and Series 2004A&B is supported by the strength of the issuer rating as well as the bank liquidity facilities supporting them. The affirmation of the P-1 ratings on the tax-exempt and taxable commercial paper (CP) programs reflect the self-liquidity and strong treasury management of the university as well as the issuer rating.RATING OUTLOOKThe stable outlook reflects Cornell's continued revenue growth and solid debt service coverage from operations. With diverse sources of funding for capital investments including gifts and grants, incremental debt will be manageable.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Sustained growth in cash and investments materially outpacing peers, especially unrestricted cash and investments- Strengthened operating performance combined with ongoing fundraising successFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Material declines in liquidity or deterioration in operating performance- Significant increase in financial leverage - Weakened operating performance of medical physicians' organization - For the commercial paper rating, weakened treasury management or reduction in immediately available assets to support remarketing- For the VRDBs, termination of the bank liquidity facilities or material deterioration of counterparty credit qualityLEGAL SECURITYAll of the rated bonds are an unsecured general obligation.PROFILECornell University is a private Ivy League university and land-grant research university which generated operating revenue of $4.8 billion in fiscal 2021. The university's main campus is in Ithaca, New York. New York City is home to both Weill Cornell Medicine and the Cornell Tech campus. Weill Cornell Medicine also has a campus in Doha, Qatar. Three of the university's seven undergraduate colleges are contract colleges partially supported by the State of New York, in addition to the College of Veterinary Medicine.METHODOLOGY The principal methodology used in the long-term ratings was Higher Education Methodology published in August 2021 and available at https://ratings.moodys.com/api/rmc-documents/72158. The principal methodology used in the short-term underlying ratings was Short-term Debt of US States, Municipalities and Nonprofits Methodology published in July 2020 and available at https://ratings.moodys.com/api/rmc-documents/67339. The principal methodology used in the short-term enhanced ratings was Variable Rate Instruments Supported by Conditional Liquidity Facilities published in March 2017 and available at https://ratings.moodys.com/api/rmc-documents/68283. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of these methodologies. REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating. 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