TEXT-Fitch affirms University of La Verne, Calif. revs at 'BBB+'

Thu Nov 8, 2012 6:02pm EST

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Nov 8 - Fitch Ratings affirms the 'BBB+' rating on the following series of
bonds issued on behalf of University of La Verne (La Verne):

--70.5 million California Municipal Finance Authority, revenue bonds, series
2010A;
--$17.9 million California Educational Facilities Authority, revenue bonds,
series 2005A

The Rating Outlook is Stable.

SECURITY

The bonds are a general obligation of the college, payable from legally
available funds. Security interest in deeds of trust on certain portions of La
Verne's campus and cash funded debt service reserve funds provide additional
bondholder protection.

KEY RATING DRIVERS

STABLE CREDIT CHARACTERISTICS: La Verne's historically positive operating
margin, adequate balance sheet resources, and manageable debt burden underpin
the 'BBB+' rating. Credit concerns include the university's significant reliance
on student-generated revenues, which makes financial performance vulnerable to
unanticipated fluctuations in enrollment.

SOUND FINANCIAL PROFILE: Adherence to prudent financial practices, as
demonstrated by multi-year financial forecasting and conservative budgeting
assumptions, have supported year-over-year generation of operating surpluses and
the preservation of an adequate financial cushion. Preliminary data indicates
that both operating performance and the level of balance sheet resources
remained sound in fiscal 2012.

HIGH REVENUE CONCENTRATION: La Verne continues to be highly dependent upon
student-generated revenues to fund operations, which is partially offset by the
university's track-record of relatively healthy overall enrollment trends. While
unofficial fall 2012 figures indicate that La Verne's College of Law and certain
education programs continue to be challenged, the impact from a budgetary
standpoint is being managed effectively.

MANAGEABLE DEBT BURDEN: La Verne's debt burden remains moderately high but
manageable, as MADS consumed 6.4% of fiscal 2011 operating revenues. The
university has no near-term debt financing plans, which should support debt
moderation over time. Annual surpluses regularly provide a sound coverage of the
university's annual debt service obligations (2.2 times in fiscal 2011).

CREDIT PROFILE
La Verne's financial profile has remained stable since Fitch's last review.
Unaudited results for fiscal 2012 indicate another consecutive year of solidly
positive operating performance, in line with the prior year's results (fiscal
2011 operating margin was 7.4%). Financial results were supported by
better-than-anticipated student-generated revenues associated with conservative
enrollment forecasting, favorable expense variances, and untapped contingency
reserves.

The university's ability to maintain balanced operations is highly contingent
upon stability in its primary revenue stream - student-generated revenues. These
revenues have historically provided 92.8% of annual operating revenues (fiscal
2007-fiscal 2011), underscoring the importance of effective enrollment
management. La Verne's total headcount enrollment, which underpins
student-generated revenues, remained effectively flat in fall 2011 at 9,556, or
-0.1% relative to fall 2010. Stable enrollment trends are viewed favorably by
Fitch.

Preliminary fall 2012 data points to further growth in undergraduate headcount,
bolstered by enhanced enrollment management strategies and pressures facing the
state's public university systems. A second consecutive year of declines in
graduate headcount was primarily related to challenges facing the La Verne's
College of Law (COL) and the College of Education. The university successfully
navigated graduate headcount declines through conservative enrollment
forecasting, budgetary adjustments, and growth in other programs.

Importantly, the COL saw its provisional American Bar Association (ABA)
accreditation reinstated in March 2012 for a five-year term. According to
management, the original loss in provisional ABA accreditation in June 2011 was
a major contributing factor to the COL's recent enrollment declines. Fitch will
closely monitor enrollment trends in law school and management's response to any
operating challenges going forward.

La Verne's available funds, defined by Fitch as cash and investments not
permanently restricted, totaled $71.1 million at the end of fiscal 2011,
covering a satisfactory 64.2% of operating expenses and 70.2% of total debt.
Preliminary fiscal 2012 financial data show a modest improvement in available
funds over fiscal 2011 levels.

The university completed the construction of a new residence hall in August 2012
using series 2010 bond proceeds. Fitch favorably notes that the project was
finished on time and budget, and that fall 2012 occupancy stood at 98%, which
was well ahead of the original estimation of 85%. Near-term capital projects are
being funded through remaining series 2010 bond proceeds and operating
surpluses, which should allow the university's debt burden to lessen over time.
Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Revenue Supported Rating Criteria'(June 12, 2012);
--'U.S. College and University Rating Criteria'(May 25, 2012);
--'Fitch Affirms University of La Verne's (California) Revs at 'BBB+'; Outlook
Stable' (Nov. 22, 2011).

Applicable Criteria and Related Research:
Revenue-Supported Rating Criteria
U.S. College and University Rating Criteria
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