Fitch Rates Claremont Graduate University's (California) Revs 'A'

NEW YORK--(Business Wire)--
Fitch Ratings assigns an 'A' rating to $15,000,000 California
Educational Facilities Authority revenue bonds 2008 series A issued on
behalf of Claremont Graduate University (CGU). The 2008 series A bonds
(the bonds) are scheduled to price via negotiated sale on or about
August 7th and will fund several capital plan projects; refinance an
outstanding loan; fund capitalized interest through March 2009; and
pay various costs of issuance. At the same time, Fitch assigns an 'A'
rating to $3,965,000 of outstanding series 1999A revenue bonds and
$36,000,000 of outstanding series 2007A revenue bonds previously
issued by CEFA on behalf of CGU. Revenue bonds represent an unsecured,
general obligation of CGU. The Rating Outlook is Stable.

The 'A' rating reflects solid balance sheet liquidity supported by
a balanced investment mix and reasonable endowment spending policy;
stable enrollment fostered by CGU's market niche as a private,
independent graduate university, and its unique focus on
interdisciplinary academic programs and research; a renewed focus on
fundraising following several years of relatively limited, large-scale
institutional development activities; and proactive investments being
made by CGU's fairly new management team in both programs and
facilities to strengthen the university's competitive position.

Primary credit concerns include lackluster operating performance
which has been generally no better than break-even over the past five
fiscal years; high, though manageable, levels of financial leverage;
weakened investment performance as a result of recent financial market
turmoil; and management turnover which has resulted in a new, but
experienced, leadership team. While CGU has indicated additional debt
may be issued over the next three to five years to fund additional
campus improvements, Fitch expects any such issuance to be supported
by stabilized operating performance and/or growth in resources
available for its repayment.

CGU served approximately 1,243 full-time equivalent (FTE's)
students during fiscal 2008, offering 40 degree and certificate
programs in approximately 24 fields of study. With tuition and fees
representing a fairly high (72.9%) of operating revenues, CGU must
manage its enrollment to prevent a material weakening in annual
financial performance. Since fall 2003, FTE's have increased by an
average annual rate of approximately 1.3%.

CGU's second largest source of revenue is investment income
(13.5%) generated principally from a 5% spending rate, based upon a
twelve quarter market value average, applied to its pooled investment
fund (the fund). As of June 30, 2007, CGU's pooled investments totaled
approximately $195.5 million. Since that time, financial market
fluctuations have caused a moderate decline in the value of the fund.
Importantly, Fitch notes the decline is in-line with the experience of
other colleges and universities with a similar heavy weighting toward
equity (approximately 60%). Moreover, pooled investments have a
long-term focus and can be expected to fluctuate in response to
various market cycles.

CGU's operating margin in fiscal 2007 equaled a negative 2.1% down
from a positive .4% in fiscal 2006. Weakening financial performance in
fiscal 2007 reflected several one-time expenditures, including costs
associated with the opening of an academic support center; renovations
to various auxiliaries; and the acquisition of a property near campus.
Fiscal 2008 performance is expected to improve slightly, with a
break-even level of performance anticipated for fiscal 2009. CGU's
below 'A' median level operating margin is counterbalanced by its
strong liquidity. Available funds, which is measured as cash and
investments which are not permanently restricted, equaled
approximately $110.4 million in fiscal 2007, representing
approximately 228.3% of operating expenses and 195.5% of pro-forma
debt. Fitch's median of available funds to operating expenses for an
'A' category private college is 83.1%. The median of available funds
to debt is 90.0%. CGU has fairly limited exposure to less liquid
alternative asset classes.

Over the past several fiscal years, CGU's senior management team
has experienced turnover as the president; senior vice president for
finance and administration; the provost; and vice president for
development are fairly new. While this poses some risk, each new
member of the team is experienced in their respective field and brings
expertise in strategic and facilities master planning. Comprehensive
fundraising has been one of the primary areas CGU plans to address
over the near term as it prepares for its first capital plan in
several years. While as a graduate institution it is more difficult to
fundraise from alumni, CGU is developing an infrastructure to energize
this base as well as further the success it has had in securing gifts
from private foundations. In Fitch's view, significant upside
potential exists for fundraising at CGU.

Located in Claremont, California, CGU is one of seven educational
institutions comprising the Claremont Colleges consortium. It is one
of only two consortium members devoted exclusively to graduate
education.

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.

Fitch Ratings, New York
Douglas J. Kilcommons, 212-908-0740
Colin Walsh, 212-908-0767
Sandro Scenga, 212-908-0278 (Media Relations)

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