ML25337A146
| ML25337A146 | |
| Person / Time | |
|---|---|
| Site: | 07000938 |
| Issue date: | 05/02/2025 |
| From: | Massachusetts Institute of Technology (MIT) |
| To: | Office of Nuclear Material Safety and Safeguards |
| Shared Package | |
| ML25337A139 | List: |
| References | |
| Download: ML25337A146 (0) | |
Text
Research Update:
Massachusetts Institute of Technology Series Q Bonds Assigned 'AAA' Rating; Outlook Is Stable May 2, 2025 Overview
- S&P Global Ratings assigned its AAA rating to Massachusetts Institute of Technologys (MIT)
$750 million taxable series Q bonds.
- At the same time, S&P Global Ratings affirmed its 'AAA' and 'AAA/A-1+' ratings on MITs debt outstanding, some of which is issued by MIT or by the Massachusetts Development Finance Agency (formerly known as the Massachusetts Health and Educational Facilities Authority).
- The outlook, where applicable, is stable.
Rationale Security All of MIT's debt is a general obligation of the institution. As of June 30, 2024, MIT had $4.7 billion in debt outstanding, including $209 million in leases outstanding. As of fiscal year-end 2024, MIT had no capital leases outstanding and maintains a $500 million line of credit, none of which is currently drawn. With this issuance, pro forma debt will rise to $5.4 billion. Bond proceeds will be used for general corporate purposes.
Credit highlights The 'AAA' rating reflects our view of MIT's extremely strong enterprise risk profile, characterized by extraordinary demand for its programs, exceptional student quality, a geographically diverse student body, and impressive management and governance oversight. We assessed the institute's financial risk profile as very strong, with a substantial endowment and a track record of excellent operating performance. We also note MIT's relatively high debt burden compared with that of peers, and the substantial capital plans for deferred maintenance, including infrastructure and renewal. Combined, these factors lead to an anchor of 'aa+.' In accordance with our criteria, the final rating can be within one notch of the indicative credit level. In our Primary contacts Laura A Kuffler-Macdonald New York 1-212-438-2519 laura.kuffler.macdonald
@spglobal.com Jessica H Goldman Hartford 1-212-438-6484 jessica.goldman
@spglobal.com www.spglobal.com/ratingsdirect May 2, 2025 1
opinion, the 'AAA' rating on the institute's bonds better reflects MIT's exceptional enterprise risk profile and endowment.
The 'A-1+' short-term rating reflects our view of MIT's general credit strengths and considerable experience in managing its own liquidity. MIT is providing its own liquidity to support its $250 million series J-1 (swapped to fixed-rate) and J-2 variable-rate demand bonds (VRDBs). We believe MIT demonstrates sufficient liquid assets of high credit quality--largely in U.S.
Treasuries--as well as a bank line that it can use, among other things, to cover the purchase price of VRDBs if any of the bonds are tendered but not successfully remarketed. Availability of liquid assets is sufficient, in our opinion, with same-day liquidity composed of high-quality U.S.
government securities and cash. As of March 31, 2025, MIT had $1.8 billion in available cash and cash equivalents and a total of $4.3 billion in discounted assets available, which was more than sufficient to cover the series J-1 and J-2 bonds. In our view, MIT has demonstrated the policies and procedures necessary to provide self-liquidity.
The 'AAA' rating is further supported by the institute's:
- Status as a pre-eminent research institute, with $2.3 billion in in revenue from sponsored research and other sponsored activities in fiscal 2024;
- Very large and growing endowment of $24.7 billion as of June 30, 2024;
- Impressive demand, excellent student quality, and increasingly competitive admissions;
- Successful history of fundraising;
- Healthy financial resource ratios, with cash and investments of $32.2 billion in fiscal 2024, equal to 6.1x operations and 5.9x pro forma debt; and
- History of positive operating performance, supported by good revenue diversity and the demonstrated ability to raise funds.
Offsetting factors include our view of MIT's:
- High debt burden that rises over time, although it is manageable in the near term, with an average annual pro forma debt burden of 5.5% over the next 30 years; and
- Substantial capital and strategic plans, although additional debt is not expected in the medium term.
MIT is one of the pre-eminent research institutes in the world, composed of major interdisciplinary organizations as well as three off-campus research facilities in Massachusetts:
Lincoln Laboratory in Lexington, Haystack Observatory in Tyngsborough, and the Bates Linear Accelerator Center in Middleton. MIT operates Lincoln Laboratory as a federally funded research and development center focused on advanced electronics. In fiscal 2024, MIT's research and other sponsored activities accounted for approximately $2.3 billion in revenues, including the campus, Lincoln Laboratory, and the Singapore-MIT Alliance for Research and Technology. Lincoln Laboratory accounts for $1.4 billion in MITs research funding, of which $1.3 billion is funded by the federal government under a long-term contract where the indirect cost recovery rate related to services provided by campus is below 15%. Of the remaining sponsored support revenue, $648 million was from the federal government for campus sponsored research and other sponsored activities.
In our view, there are heightened sector risks, including those related to MIT's significant research program given evolving federal policies under the new U.S. administration. However, we view the institutes financial position as sound given its robust liquidity and flexibility in the face of short-term funding disruptions. The negotiated indirect cost-recovery rate for MIT www.spglobal.com/ratingsdirect May 2, 2025 2 Massachusetts Institute of Technology Series Q Bonds Assigned 'AAA' Rating; Outlook Is Stable
varies. Management estimates that approximately $110 million of funding could be at risk if a 15% cap is imposed on indirect cost recoveries from all federal agencies. Given evolving federal policies, management is assessing the potential effects of funding disruptions, reductions to federal funding, or the imposition of caps on indirect cost recoveries. We believe that the university maintains significant liquidity to provide it with flexibility should any of these transpire.
Environmental, social, and governance Overall, environmental, social, and governance (ESG) factors are neutral in our analysis.
However, data from S&P Global Sustainable1 indicates that entities in Middlesex County face comparatively elevated exposure to severe river flooding over the long term, and these exposures could increase under several climate change scenarios.
Rating above the sovereign MIT's bonds are eligible to be rated above the sovereign because of a moderate sensitivity to country risk. MIT's revenues are the sole source of security on the bonds. The institutional framework in the U.S. is predictable, with institutions like MIT having significant autonomy, as well as independent treasury management. Financial flexibility is supported by the institute's large endowment market value, which is invested globally, and its low relative debt levels.
For more information on MIT, please see our full analysis, published Dec. 10, 2024.
Outlook The stable outlook reflects our expectation that in the near term, MIT will maintain its excellent demand characteristics, positive operating performance, and robust financial resources. We anticipate that operating performance could be strained due to changes in federal funding while management proceeds with efforts to reduce expenses. The outlook also reflects our expectation that any debt issuance will be balanced, with commensurate growth in resources.
Downside scenario Credit factors that could lead us to lower the rating within the outlook period include an unexpected and significant decrease in MIT's demand profile, operating performance, or if financial resources deteriorate. There could also be pressure if there are significant impacts related to evolving federal policies around funding for research or other policies that lead to a materially weaker financial position.
Massachusetts Institute of Technology, Massachusetts--enterprise and financial statistics
--Fiscal year ended June 30--
Medians for
'AAA' rated private colleges &
universities 2025 2024 2023 2022 2021 2023 Enrollment and demand Full-time-equivalent enrollment 11,750 11,777 11,703 11,837 11,084 10,252 Undergraduates as a % of total enrollment 38.3 38.7 39.5 38.9 38.6 54.4 First-year acceptance rate (%)
4.5 4.8 4.0 4.1 7.3 6.0 www.spglobal.com/ratingsdirect May 2, 2025 3 Massachusetts Institute of Technology Series Q Bonds Assigned 'AAA' Rating; Outlook Is Stable
Massachusetts Institute of Technology, Massachusetts--enterprise and financial statistics
--Fiscal year ended June 30--
Medians for
'AAA' rated private colleges &
universities 2025 2024 2023 2022 2021 2023 Enrollment and demand First-year matriculation rate (%)
85.6 84.6 85.0 86.3 73.6 63.5 First-year retention rate (%)
99.0 99.0 99.0 99.0 98.0 98.0 Six-year graduation rate (%)
96.0 96.0 95.0 96.0 96.0 94.5 Financial performance Adjusted operating revenue ($000s)
N.A.
5,553,560 5,091,782 4,648,430 4,321,012 MNR Adjusted operating expense ($000s)
N.A.
5,271,243 4,963,677 4,608,835 4,265,178 MNR Net operating margin (%)
N.A.
5.4 2.6 0.9 1.3 2.9 Change in unrestricted net assets ($000s)
N.A.
793,199 (295,888)
(1,430,139) 6,143,704 MNR Tuition discount (%)
N.A.
53.3 52.5 50.1 53.8 47.5 Student dependence (%)
N.A.
19.4 20.0 21.0 19.1 34.4 Health care operations dependence (%)
N.A.
N.A.
N.A.
N.A.
N.A.
MNR Research dependence (%)
N.A.
41.9 40.5 42.8 45.3 13.0 Financial resources Endowment market value ($000s)
N.A.
24,715,030 23,615,406 24,739,862 27,527,204 11,663,432 Cash and investments ($000s)
N.A.
32,162,181 31,220,609 32,923,303 35,138,957 13,689,600 Cash and investments to operations (%)
N.A.
610.1 629.0 714.4 823.9 796.3 Cash and investments to debt (%)
N.A.
689.2 659.3 667.5 829.5 875.1 Cash and investments to pro forma debt (%)
N.A.
593.8 N.A.
N.A.
N.A.
MNR Debt Outstanding debt ($000s)
N.A.
4,666,763 4,735,770 4,932,346 4,236,113 1,853,394 Proposed debt ($000s)
N.A.
750,000 N.A.
N.A.
N.A.
MNR Total pro forma debt ($000s)
N.A.
5,416,763 N.A.
N.A.
N.A.
MNR Current MADS burden (%)
N.A.
4.5 4.9 5.4 5.0 5.4 Pro forma MADS burden (%)
N.A.
5.5 N.A.
N.A.
N.A.
MNR Average age of plant (years)
N.A.
10.0 10.1 10.4 10.4 13.8 Total adjusted operating revenue = unrestricted revenue less realized and unrealized gains/losses and financial aid. Total adjusted operating expense =
unrestricted expense plus financial aid expense. Net operating margin = 100*(net adjusted operating income/adjusted operating expense). Student dependence =
100*(gross tuition revenue + auxiliary revenue) / adjusted operating revenue. Current MADS burden = 100*(maximum annual debt service expense/adjusted operating expenses). Cash and investments = cash + short-term and long-term investments. Average age of plant = accumulated depreciation/depreciation and amortization expense. N.A.--Not available. MNR--Median not reported. MADS--Maximum annual debt service.
Ratings List New Issue Ratings US$750.0 mil taxable bnds ser Q dtd 05/15/2025 due 06/01/2055 Long Term Rating AAA/Stable Ratings Affirmed Education www.spglobal.com/ratingsdirect May 2, 2025 4 Massachusetts Institute of Technology Series Q Bonds Assigned 'AAA' Rating; Outlook Is Stable
Ratings List Massachusetts Inst of Tech, MA General Obligation AAA/Stable Massachusetts Inst of Tech, MA General Obligation A-1+
The ratings appearing below the new issues represent an aggregation of debt issues (ASID) associated with related maturities. The maturities similarly reflect our opinion about the creditworthiness of the U.S. Public Finance obligor's legal pledge for payment of the financial obligation. Nevertheless, these maturities may have different credit ratings than the rating presented next to the ASID depending on whether or not additional legal pledge(s) support the specific maturity's payment obligation, such as credit enhancement, as a result of defeasance, or other factors.
Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at https://disclosure.spglobal.com/ratings/en/regulatory/ratings-criteria for further information. A description of each of S&P Global Ratings' rating categories is contained in "S&P Global Ratings Definitions" at https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/sourceId/504352. Complete ratings information is available to RatingsDirect subscribers at www.capitaliq.com. All ratings referenced herein can be found on S&P Global Ratings' public website at www.spglobal.com/ratings.
www.spglobal.com/ratingsdirect May 2, 2025 5 Massachusetts Institute of Technology Series Q Bonds Assigned 'AAA' Rating; Outlook Is Stable
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