Fitch Ratings affirms the 'BBB-' rating on Albany College of Pharmacy's (the college) $13,710,000 of outstanding City of Albany Industrial Development Agency civic facility revenue bonds, series 2004A. The bonds are a general obligation of the college secured by a pledge of gross revenues and a mortgage lien and security interest in the student center and classroom building. The Rating Outlook is Stable.
The 'BBB-' rating reflects the college's satisfactory liquidity; positive operating margins over the past three fiscal years; and solid demand trends. While the college has demonstrated improved liquidity and strengthened financial operations, its small size limits operating flexibility and the ability to mitigate declines in student demand. Additional credit concerns include the college's significant reliance on student generated revenues to fund operations; a moderate, though manageable debt burden; and the financial impact, if any, of a pending lawsuit.
For fiscal 2007, the college had available funds of $15.9 million, representing 57.6% and 60.7% of operating expenses and total debt, respectively. However, the college is involved in a pending lawsuit filed by two former students seeking compensatory and punitive damages in excess of $5 million. While a settlement of this size would have a negative impact on the college's liquidity, it has insurance coverage for defense and certain potential settlement costs, and has moved to have the lawsuit dismissed in its entirety.
The college's operating margin improved to a strong 17.3% for fiscal 2007, up from 10.4% for fiscal 2006, driven in large part by enrollment growth. Tuition and auxiliary revenues represented the college's largest revenue source in fiscal 2007 at 81.6% of unrestricted operating revenues. The college had total debt outstanding of $29.3 million as of June 30, 2008, approximately 52% of which constitute variable rate demand bonds. Maximum annual debt service of approximately $2 million represented a moderate 6.1% of revenues.
Full-time equivalent enrollment increased a significant 16.6% in fall 2007 to 1,434 from 1,230 in fall 2006. Applications continued to increase with 1,254 applications received in fall 2007 versus 1,048 received in fall 2006. The opening of a new satellite campus in Vermont and the commencement of a graduate program in fall 2009 are expected to further bolster enrollment growth.
Albany College of Pharmacy was founded in 1881 and is the oldest pharmaceutical school in New York state. The college offers programs in pharmaceutical sciences, health and human sciences, and biomedical technology.
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