Rating Action: Moody’s assigns A2 to Pittsburg State University’s (KS) revenue refunding bonds; outlook stableGlobal Credit Research – 10 Jan 2022New York, January 10, 2022 — Moody’s Investors Service has assigned an A2 rating to Pittsburg State University (KS) (PSU) proposed $23 million Refunding Revenue Bonds, Series 2022E (Pittsburg State University Projects). The bonds will be issued by the Kansas Development Finance Authority and have a final maturity in 2035. At this time, Moody’s has also affirmed the A2 issuer and parity debt ratings. The outlook is stable. The university had outstanding debt of about $47 million as of fiscal 2021.RATINGS RATIONALEAffirmation of Pittsburg State University’s A2 issuer rating is supported by its solid wealth, providing for a favorable cushion to expenses and manageable leverage. Total cash and investments of $163 million covered total adjusted debt and expenses by a strong 1.9x and 1.7x, respectively, in fiscal 2021. PSU’s very good financial strategy and policies will contribute to maintenance of EBIDA margins above 10% despite ongoing net tuition revenue pressures driven by a combination of weak regional demographics and highly competitive conditions. Further, solid state funding to support operations and capital represents a stabilizing credit factor as the university introduces a number of strategies intended to improve student demand. While the number of full-time equivalent students has declined by 19% over the last five years to 4,839 students for fall 2021, the university maintains a regionally important role as a low-cost provider of public higher education with some programmatic distinction. Still, heightened competitive challenges will continue to weigh on the university’s good brand and strategic positioning.Assignment and affirmation of the A2 debt ratings incorporates the broad nature of the revenue pledge, including state funding and tuition and fees, and the A2 issuer rating.RATING OUTLOOKThe stable outlook reflects Moody’s expectations that the university will continue to adjust expenses accordingly to sustain EBIDA margins above 10%. It also reflects expectations of continued solid liquidity and stable state funding.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Improvement in brand and strategic positioning, reflected by strengthening student demand, revenue growth, and philanthropy- Sustained stronger operating performance and debt service coverageFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Inability to sustain EBIDA margins above 10%- Significant decline in state financial support- Material increase in financial leverageLEGAL SECURITYAll debt, including the proposed Series 2022E bonds, are payable from a general revenue pledge of the university, excluding restricted revenues. Restricted revenues include funds and revenues restricted by the Legislature, Board of Regents, or the university other than for the payment of debt service; funds and revenues specifically pledged to secure the payment of revenue obligations of the Board or the University; and gifts, fees and other revenues restricted to a use other than payment of debt service by the donor, the Board, or the university. In fiscal 2021, pledged revenues totaled $63.5 million, which represents about 60% of total Moody’s adjusted operating revenue.USE OF PROCEEDSThe proposed Series 2022E bonds will be used to refund certain maturities on the outstanding 2014A-1 and 2011D bonds to achieve economic savings.PROFILEPittsburg State University is a regional public university located in southeastern Kansas. It benefits from a large out-of-state student draw, accounting for approximately 36% of total fall 2021 enrollment. PSU distinguishes itself from competitors with its College of Technology, including specific programming in automotive technology, engineering technology, and graphics & imaging technology, among others. In fall 2021, the university enrolled 4,839 full-time equivalent students and recorded fiscal 2021 operating revenue of $105 million.METHODOLOGYThe principal methodology used in these ratings was Higher Education Methodology published in August 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1257002. 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. 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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. 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