U.S. markets open in 8 hours 53 minutes
  • S&P Futures

    3,755.75
    -9.75 (-0.26%)
     
  • Dow Futures

    30,804.00
    -74.00 (-0.24%)
     
  • Nasdaq Futures

    12,408.75
    -46.25 (-0.37%)
     
  • Russell 2000 Futures

    2,135.90
    -8.60 (-0.40%)
     
  • Crude Oil

    64.30
    +0.47 (+0.74%)
     
  • Gold

    1,690.00
    -10.70 (-0.63%)
     
  • Silver

    25.21
    -0.25 (-0.99%)
     
  • EUR/USD

    1.1965
    -0.0014 (-0.12%)
     
  • 10-Yr Bond

    1.5500
    -1.4700 (-100.00%)
     
  • Vix

    28.57
    -26.67 (-100.00%)
     
  • GBP/USD

    1.3891
    -0.0003 (-0.02%)
     
  • USD/JPY

    108.0410
    +0.0650 (+0.06%)
     
  • BTC-USD

    47,042.35
    -2,608.02 (-5.25%)
     
  • CMC Crypto 200

    939.72
    -47.49 (-4.81%)
     
  • FTSE 100

    6,650.88
    -24.59 (-0.37%)
     
  • Nikkei 225

    28,631.18
    -298.93 (-1.03%)
     

Noorda College of Osteopathic Medicine, LLC -- Moody's assigns first-time Ba2 rating to Noorda College of Osteopathic Medicine, LLC's Taxable Educational Facilities Revenue Bonds Series 2021A and Series 2021B issued through the Public Finance Authority; outlook stable

·17 min read

Rating Action: Moody's assigns first-time Ba2 rating to Noorda College of Osteopathic Medicine, LLC's Taxable Educational Facilities Revenue Bonds Series 2021A and Series 2021B issued through the Public Finance Authority; outlook stableGlobal Credit Research - 10 Feb 2021Approximately $127 million of debt securities affectedNew York, February 10, 2021 -- Moody's Investors Service, ("Moody's") has assigned a first-time Ba2 rating to Noorda College of Osteopathic Medicine, LLC's (Noorda COM) $48 million Taxable Educational Facilities Revenue Bonds (Noorda College of Osteopathic Medicine Project) Series 2021A and $78.6 million Taxable Educational Facilities Revenue Bonds (Noorda College of Osteopathic Medicine Project) Series 2021B issued by the Public Finance Authority. The outlook is stable.Bond proceeds will be used to design, build, construct and furnish a new four story academic building, finance initial working capital requirements, fund the indenture required reserve accounts, fund capitalized interest until August 1, 2024, and pay issuance costs.Noorda College of Osteopathic Medicine, LLC ("Noorda COM") is the obligor for the bonds and was formed in March 2017 in the City of Provo, Utah with a mission to provide a critically needed solution to acute physician shortages in Utah and the contiguous Rocky Mountain States' region, including Montana, Wyoming, South Dakota, and North Dakota.RATINGS RATIONALEThe Ba2 rating reflects Noorda COM's strong revenue generating potential and cashflow predictability owing to the limited number of MD (Doctor of Medicine) and DO (Doctor of Osteopathic Medicine) school spots in the US despite a materially outsized demand. This view has been already substantiated by the high number of applications received to date that currently exceed 13x the size of the fall 2021 inaugural class. This strong demand is forecast to continue, and the competitive tuition rates assumed support a relatively high degree of cashflow predictability with strong resiliency as annual debt service coverage ratios should exceed 3.0x in most reasonable sensitivities. Further, the high need for doctors in Utah today will only increase as Utah only has two medical schools, has the lowest ratio of primary care physicians to population of any US state, and is the 3rd fastest growing state in the US by population. These factors, coupled with an aging population that will lead to more doctors retiring but also an increased demand for healthcare services, create a gap in healthcare providers in Utah, which already exists in many regions today. Noorda COM helps provide one solution to this rising social risk within the state, helping to establish its market position over time. While providing key social benefits, Noorda COM also has the social risk associated with private ownership coupled with the fact that the majority of medical students will graduate with a large amount of student loan debt outstanding. This social risk under Moody's environmental, social and governance (ESG) framework may expose Noorda COM to regulatory changes compared to a not-for-profit or public institution. Yet the social benefit the school provides is likely to temper the negative impact of any new regulatory change.The rating is constrained by Noorda COM's early stage operations and its current pre-accreditation status as well as low liquidity compared to a more established higher education institution. The rating is further constrained by Noorda COM's limited scale ($50 million in operating revenues in 2027 in the base case) and revenue concentration that is almost entirely tuition dependent. We believe full accreditation is likely to be obtained by year-end 2025 as planned given no DO school that has reached pre-accreditation stage has ever failed to achieve full accreditation status to date. Further, Noorda COM has a sound plan that it is progressing on to meet, and in some cases exceed, the accreditation standards. The Dean leading the efforts has experience accrediting new DO schools for the American Osteopathic Association's (AOA) Commission on Osteopathic College Accreditation (COCA) and has a deep understanding of their requirements as well. The strong experience and local connections of both the Dean and the Board of Trustees provides a sound governance foundation on which to build which should lead to both accreditation and overall sound operating performance. From a liquidity perspective, while there are covenanted required working capital liquidity levels and additional reserve funds, the majority of excess cashflows are distributed to the private owners, limiting the potential for a liquidity cushion to emerge to address any material event over the long-term.The rating benefits from relatively strong ring fencing provisions that support good governance, including the single special purpose nature of Noorda COM LLC, limitations on any material new amount of debt while the initial loans are outstanding, a covenant not to merge or consolidate with another entity, a clear separation of accounts from the ultimate equity owners and an Independent Manager in place to block any bankruptcy filings. The rating acknowledges the sound project financing protections as well, including third party trusteed funds via an established cashflow waterfall; a cash funded six-month debt service reserve fund; a renewal and replacement reserve fund and about 90 days cash on hand per Moody's calculation; capitalized interest covers all debt service until August 1, 2024 with no ability to distribute excess cashflow until after the Teach Out and Operating Reserves have been released, a 1.30x DSCR has been achieved and all indenture required reserve funds have been funded; and security in all key assets, documents and accounts. Favorably, when the COCA required Teach Out and Operating Reserves are released, they will early redeem debt which deleverages Noorda COM to the more manageable level in 2026 and all debt is repaid by 2045 despite the school's in perpetuity status.RATING OUTLOOKThe stable outlook reflects our view that the high demand for the inaugural fall class and the advance preparations by Noorda COM will help support the launch of the new osteopathic medical school. The outlook also reflects our expectation that Noorda COM will continue to progress to successfully satisfy the COCA accreditation requirements to receive full accreditation by year-end 2025 as required. The outlook also incorporates our expectation that construction of the new main campus facility will progress relatively on time and on budget.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSFACTORS THAT COULD LEAD TO AN UPGRADE** Receipt of full accreditation without conditions or qualifications** Establishment of a sound market position with a consistent demand base and pricing power leading to DSCRs over 4.0x and faster than forecast deleveraging** Strong working relationships with regional partners and the state** Material improvement in required level of balance sheet liquidity at Noorda COM levelFACTORS THAT COULD LEAD TO A DOWNGRADE** Any indication that accreditation is at risk of not being received by the end of December 2025** Tighter margins owing to the inability to charge tuition increases or higher than expected expenses that result in DSCRs below 2.0x on a consistent basis** Liquidity declines below required levels** Inability to establish the school's stable or niche market position over timeThe principal methodology used in these ratings was Generic Project Finance Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1194215. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.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 at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.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 ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.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 www.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://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.At least one ESG consideration was material to the credit rating action(s) announced and described above.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 www.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 www.moodys.com.Please see www.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 ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. John Medina VP - Senior Credit Officer Project Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 A.J. Sabatelle Associate Managing Director Project Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements. ​