Morningstar DBRS Confirms Ratings on Trent University at “A” with Stable Trends

DBRS Limited (Morningstar DBRS) confirmed the Issuer Rating and Senior Unsecured Debentures rating of Trent University (Trent or the University) at “A” with Stable trends.

KEY CREDIT RATING CONSIDERATIONS
The ratings reflect Trent’s academic profile as a primarily undergraduate university in the Province of Ontario (Ontario or the Province; rated AA (low) with a Positive trend), ongoing enrolment growth, and a low and declining debt burden. The ratings remain constrained by the current challenging operating environment, which is mainly characterized by the constrained funding and tuition framework and the potential impact of uncertain international relations on international student mobility.

In 2022–23, Trent recorded a consolidated surplus (before capital and project appropriations) of $25.8 million (10.5% of revenues) as revenues across most categories increased. For 2023–24, Trent's operating budget projects a balanced position. On an operating basis, revenues are budgeted to grow by 5.7% relative to the 2022–23 projections mainly driven by increased tuition revenues. Over the medium term, the University anticipates ongoing modest surpluses to be supported by planned growth in enrolment (including international students and the expansion of the Durham campus) and prudent spending and strategic investments.

At April 30, 2023, Trent’s long-term debt totalled $79.3 million, or $6,697 per full-time equivalent (FTE). In the absence of planned material new borrowing, Morningstar DBRS expects debt-per-FTE to decline to roughly $5,700 over the medium term. This lower debt burden along with an enduring strength in interest coverage and expendable resources-to-debt should provide Trent with increased flexibility to withstand adverse impacts from a still-challenging operating environment.

CREDIT RATING DRIVERS
A positive rating action depends on a combination of sustained improvement in financial risk assessment metrics and an improvement in Morningstar DBRS' assessment of one or more critical rating factors. While unlikely, a negative rating action could arise from a significant and sustained deterioration in operating results or from a material increase in debt.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no Environmental, Social and Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (July 4, 2023) https://dbrs.morningstar.com/research/416784/dbrs-morningstar-criteria:-approach-to-environmental,-social,-and-governance-risk-factors-in-credit-ratings

BUSINESS RISK ASSESSMENT (BRA) AND FINANCIAL RISK ASSESSMENT (FRA)

(A) Weighting of BRA Factors
In the analysis of Trent University, the BRA factors are considered in the order of importance contemplated in the methodology.

(B) Weighting of FRA Factors
In the analysis of Trent University, the FRA factors are considered in the order of importance contemplated in the methodology.

(C) Weighting of the BRA and the FRA
In the analysis of Trent University, the BRA carries greater weight than the FRA.

Notes:
All figures are in Canadian dollars unless otherwise noted.

Morningstar DBRS applied the following principal methodology:

Rating Public Universities (May 17, 2023)
https://dbrs.morningstar.com/research/414148/rating-public-universities

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/397223.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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