NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed its 'A-' rating on approximately $21.5 million of outstanding Dormitory Authority of the State of New York revenue bonds, Mount Saint Mary College Project, series 2003. Fitch does not rate the college's approximately $28.1 million of outstanding series 2005 variable-rate demand bonds, but did incorporate this debt into its analysis. The bonds are an unsecured general obligation of Mount Saint Mary College (the college) payable from all legally available funds. The Rating Outlook is Stable.

The 'A-' rating reflects the college's long track record of positive operations; satisfactory, although weakened, balance sheet liquidity; and stable enrollment trends. Primary credit concerns include the college's limited revenue diversity, with a heavy reliance on student-generated revenues; a moderate, though manageable, debt burden; and a low matriculation rate coupled with a geographically concentrated student base.

The college's operating margin has been consistently strong for several fiscal years. However, while still positive, the operating margin declined in recent years to 14.4% in fiscal 2009 from 22.5% in fiscal 2007. The softening in operations was due largely to increased student aid and lower investment earnings. The college's long track record of positive operations has been driven mainly by increasing tuition and fee revenues and investment income, although down in fiscal 2009.

The college maintains satisfactory balance sheet liquidity, although liquidity metrics fell slightly in fiscal 2009 due to a decline in investment valuations. Available funds, defined by Fitch as unrestricted and temporarily restricted cash and investments, totaled $39.3 million in fiscal 2009, down 11% from $44.3 million in fiscal 2008. For fiscal 2009, available funds covered operating expenses ($45.6 million) by 86% and total debt ($49.8 million) by 79%. The college's investment portfolio is relatively conservative and as of Sept. 30, 2009 was comprised of approximately 48% equities, 47% fixed income, and 5% real assets. The college has minimal exposure to alternative asset classes. Furthermore, the college's recently completed capital campaign raised a total of $10.2 million.

The college's debt burden is moderately high, although manageable. For fiscal 2009, annual debt service of approximately $3.4 million consumed 6.5% of unrestricted operating revenues. While the debt burden is moderately high, the college's debt service coverage has been consistently strong; 4.1 times (x) in fiscal 2009. The college has no immediate major capital projects or debt issuance planned. However, it does have two sizeable projects planned over the next five years which are expected to be financed through fundraising and possibly debt.

Founded in 1959 by the Sisters of Saint Dominic of Newburgh, Mount Saint Mary College is a private independent liberal arts college, located in Newburgh, NY. Fall 2009 headcount enrollment was 2,717, with 2,368 full-time equivalent students, a 3.3% and 5.2% increase from fall 2008, respectively. Selectivity slightly improved in fall 2009 with a 71.9% acceptance rate, although the matriculation rate remained low at 25.5%. The lack of geographical diversity among the college's student base (approximately 90% from New York State) places concentrated emphasis on the economy and the demographics of the area and may impact the college's attendance. The college anticipates stable to modest enrollment growth going forward.

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