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Babson College, MA Bond Rating Outlook Revised To Positive On Strong Financial Profile, Improved Operating Performance

BOSTON (Standard & Poor's) Nov. 21, 2013--Standard & Poor's Ratings Services revised its outlook to positive from stable and affirmed its 'A-' rating on Massachusetts Development Finance Agency's series 2011, 2007A, and 2005A bonds, as well as its 'A-' underlying ratings (SPURs) on the series 2008A and 2008B bonds issued for Babson College. We also affirmed our 'AAA/A-1+' ratings on the series 2008A and 2008B bonds based on Standard & Poor's joint criteria and enhancement by a letter of credit (LOC).

"The outlook revision is based on Babson's solid enterprise profile and reported strong financial operating performance on a full accrual basis in recent years," said Standard & Poor's credit analyst Jennifer Soule. "Babson also sustains healthy financial resource ratios compared with our medians for the rating and only a slightly elevated debt burden." We expect that Babson's enterprise and financial profiles will remain stable over the coming years, while it continues funding its master facility plan through remaining debt proceeds, reserves, and fundraising efforts.

Babson issued $35 million in direct purchase bank debt earlier in 2013. The debt is not rated by Standard & Poor's but the impact on Babson's financial profile is fully factored.

The rating further reflects our view of Babson's solid demand profile, strong expendable resources, and conservative management team, offset by its high dependence on tuition and auxiliary revenues, history of light fundraising, and high-cost operating model.

We think Babson's financial resource levels are strong for the current rating. We could consider a higher rating over the two-year outlook period if Babson reports a consistent trend of operating margins in excess of 4% and expendable resources-to-debt approaching 2x. While unlikely over the outlook period, we could consider a lower rating if Babson's overall financial profile were to significantly deteriorate, including operating losses on a full accrual basis, enrollment decline in the undergraduate and graduate programs, or a drain of its financial resources.

Founded in 1919 and located in Wellesley, Mass., Babson College enrolls approximately 2,100 undergraduate and 1,200 graduate students from the U.S. and more than 60 countries worldwide. The college maintains an undergraduate liberal arts curriculum as part of its business program, which focuses on entrepreneurship. The college also grants Master of Business Administration degrees and custom Master of Science degrees through the F.W. Olin Graduate School of Business at Babson College.

Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and at www.spcapitaliq.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.

Primary Credit Analyst: Jennifer J Soule, Boston (1) 617-530-8313;jennifer.soule@standardandpoors.com Secondary Contact: Nick Waugh, Boston (1) 617-530-8342; nick.waugh@standardandpoors.com

By Barbara Spies Blair, 781-239-4621, blairb@babson.edu | 11/26/2013 12:00 AM