TEXT-Fitch affirms George School, Pa. revs at 'AA-'

Fri Nov 16, 2012 4:45pm EST

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Nov 16 - Fitch Ratings has affirmed the 'AA-' rating on approximately $33.9
million of outstanding series 2009 and series 2011 revenue bonds issued by Bucks
County Industrial Development Authority on behalf of George School (the school).

The Rating Outlook is Stable.

SECURITY
The bonds are an unsecured general obligation of the school, payable from all
legally available funds.

KEY RATING DRIVERS

STABLE CREDIT CHARACTERISTICS: The 'AA-' rating reflects the school's strong
balance sheet liquidity, favorable demand profile, and track-record of healthy
operating performance. Counterbalancing factors include limited revenue
diversity and a high debt burden.

STRONG FINANCIAL CUSHION: Balance sheet resources have grown significantly since
Fitch's last review, providing the school with considerable financial
flexibility.

HEALTHY OPERATING RESULTS: The combination of prudent financial management,
healthy enrollment trends, and continued support from the Barbara Dodd-Anderson
Charitable Lead Annuity Trust (BDA Trust) has produced year-over-year operating
surpluses. Moderately high revenue concentration in student-charges is partly
offset by the school's solid student demand.

HIGH DEBT BURDEN: The debt burden remains high and is anticipated to increase in
the near term with a potential debt issuance. The school's consistently strong
level of balance sheet resources and management's conservative financial and
budgeting practices are important offsetting factors.

WHAT COULD TRIGGER A RATING ACTION

ADDITIONAL DEBT ISSUANCE: While not anticipated, the issuance of additional
revenue bonds beyond existing debt plans could yield downward rating pressure.

CREDIT PROFILE
George School's available funds, defined by Fitch as cash and investments not
permanently restricted, remain the primary credit strength. Available funds
increased by a sizeable 75.2% in fiscal 2011 over the prior year to $87.6
million, driven by the receipt of a large bequest (approximately $30 million).
Available funds of $87.7 million in fiscal 2012 covered operating expenses and
long-term debt by a robust 3.4 times (x) and 2.7x, respectively. Exposure to
less liquid asset classes remained manageable, as these assets represented a
moderate 12.4% of fiscal 2012's total investments.

Growth in financial resources has been supported by the school's track-record of
favorable operating performance. George School generated its fifth consecutive
positive operating margin in fiscal 2012 of 4.5%. The school continues to
benefit from the BDA Trust, an irrevocable 20-year gift agreement that provides
an annual transfer of monies on an unrestricted basis (18.5% of fiscal 2012
operating revenues).

As student-related charges underpin the majority of revenues (58.7% in fiscal
2012), effective enrollment forecasting and recruiting have also been important
contributing factors in the generation of annual operating surpluses.

The schools existing debt portfolio is structured to be back loaded, with pro
forma maximum annual debt service (MADS) of $4.3 million (occurring in 2035)
consuming a high 15.4% of fiscal 2012 operating revenues. Amortizing the
school's outstanding bonds evenly, adjusted pro forma MADS of $2.8 million
consumes a still high, though more moderate, 10.5% of fiscal 2012 operating
revenues.
Counterbalancing the magnitude of debt burden under either approach is the
school's track-record of satisfactory debt service coverage from operations (1x
and 1.5x of MADS and Adjusted MADS, respectively, in fiscal 2012).

The school is planning to expand its athletic facilities in the near term, which
is to be financed through borrowing of approximately $30 million. Management
plans to absorb added debt service entirely through investment returns on an
endowment established specifically to support the new facility.
While the school's debt burden will increase after the anticipated borrowing,
Fitch believes the school's strong financial cushion, which is expected to still
provide solid coverage of long-term debt post-issuance, and track-record of
prudent financial management provide some comfort that the school is
well-positioned to manage the additional leverage.

George School is an independent boarding and day school serving grades 9 through
12. It was founded in 1893 by the Religious Society of Friends (Quakers) and is
located on 240 acres in Newtown, Pennsylvania. Total headcount enrollment has
been relatively stable for the past five years, ranging from 520 students in
fall 2008 to 545 students in fall 2012. This has been bolstered by generally
increased selectivity over the past few years across both day and boarding
school students. The matriculation rate has remained solid, with approximately
one-half and two-thirds of accepted boarding and day school applicants,
respectively, enrolling in fall 2012.

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', dated June 12, 2012 ;
--'Independent School Rating Criteria', dated June 18, 2012;
--'Fitch Rates George School, Pennsylvania's Rev Bonds 'AA-'; Outlook Stable',
dated Feb. 22, 2011.

Applicable Criteria and Related Research:
Revenue-Supported Rating Criteria
Independent School Rating Criteria
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