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.
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
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
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
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
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 Tust, 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
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
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
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.
Revenue-Supported Rating Criteria
Independent School Rating Criteria
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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
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