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Press Release: S&PGR Affirms Australian National -2-

30 Jul 2018 4:29 am
saw the completion of SA5, a new accommodation block for 500 students, as well 
as the commencement of a redevelopment of Union Court and a range of other 
academic and student residential buildings. We expect that capital expenditure 
during the next few years will be funded from internal resources, and that the 
university will not need to raise new debt in the near future. ANU's 
outstanding debt consists of unsecured indexed annuity bonds, issued in 
October 2004 with a net face value of A$105 million and a maturity of 25 
years, and A$200 million in fixed-rate medium-term notes, issued in November 
2015 with a maturity of 10 years. The annuity bonds are repayable by quarterly 
instalments of principal and interest that are indexed in line with the 
Australian Consumer Price Index. ANU's maximum annual debt service, as a 
proportion of its adjusted operating expenses, stands at a low 1.7%. 
 
In May 2018, the university recruited a new vice-president for advancement to 
refresh its fundraising efforts. At present, income from donations and 
bequests is a relatively small component of ANU's revenue base, though in 2016 
the university received a donation equivalent to about A$100 million to build 
two new student halls of residence and to fund a scholarship program. 
 
In 2016, ANU signed a 30-year concession agreement with private investors for 
its portfolio of student residences. In return for an upfront payment to the 
university, the investor consortium will receive revenue from the net rental 
stream for the next 30 years. ANU retains ultimate ownership of the 
residences, and the private investors have no recourse to the university. As 
such, S&P Global Ratings treats this arrangement as a contingent liability 
rather than as debt. In addition, ANU has quantifiable contingent liabilities 
of about A$101 million, with most of this related to uncalled capital for its 
alternative investments. 
 
In our view, the university has very strong liquidity. Its consolidated cash 
and investments have grown during 2017 to approximately A$1.8 billion, or 6.4x 
total debt, from A$1.7 billion in 2016. Most of ANU's financial assets are 
managed as part of a long-term investment pool, which is invested in a 
diversified portfolio that includes Australian and overseas equities, 
alternatives, fixed interest, cash, and property. 
 
The level of unrestricted financial resources available for debt service 
stands at about A$813 million, or 2.9x total debt. Our analysis of available 
resources excludes ANU's endowment fund, Commonwealth Superannuation Scheme 
(CSS) assets, and other special-purpose reserves, because these assets are 
generally restricted and not available to service debt. ANU's CSS account, 
which is used to meet emerging staff defined-benefit pension liabilities, is 
fully funded on an actuarial basis. 
 
--High likelihood of extraordinary government support-- 
In accordance with our criteria for government-related entities, our view of a 
high likelihood of extraordinary government support reflects our assessment of 
ANU's very important role and strong link to the Australian government. 
 
ANU is an independent, not-for-profit entity that fulfils a very important 
public policy role in its delivery of higher education and research. In 
addition, ANU is the only Australian university to receive funding through the 
National Institutes Grant. The grant allows ANU to undertake basic and applied 
research to address issues that are critical to the nation. 
 
ANU's link with the Australian government is strong, as evidenced by the 
latter's track record of significant funding and oversight of the 
higher-education sector. ANU was established under Commonwealth legislation, 
and the minister for education and training appoints seven members of the 
university's governing council. ANU reports on its spending of government 
funds to the Department of Education and Training. TEQSA regulates the sector 
and sets standards that registered higher-education providers must meet to 
maintain their registrations. In addition, the Australian government 
administers the Higher Education Loan Program, an income-contingent loan 
scheme that helps eligible students to defer payment of their tuition fees. 
 
RELATED CRITERIA 
 
     -- General Criteria: Methodology For Linking Long-Term And Short-Term 
Ratings, April 7, 2017 
     -- General Criteria: Methodology: Not-For-Profit Public And Private 
Colleges And Universities, Jan. 6, 2016 
     -- General Criteria: Rating Government-Related Entities: Methodology And 
Assumptions, March 25, 2015 
     -- General Criteria: Use Of CreditWatch And Outlooks, Sept. 14, 2009 
 
S&P Global Ratings Australia Pty Ltd holds Australian financial services 
license number 337565 under the Corporations Act 2001. S&P Global Ratings' 
credit ratings and related research are not intended for and must not be 
distributed to any person in Australia other than a wholesale client (as 
defined in Chapter 7 of the Corporations Act). 
 
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 www.standardandpoors.com for further 
information. Complete ratings information is available to subscribers of 
RatingsDirect at www.capitaliq.com. All ratings affected by this rating action 
can be found on S&P Global Ratings' public website at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column. 
 
Primary Credit Analyst: Martin J Foo, Melbourne +  61 3 9631 2016; 
                        Martin.Foo@spglobal.com 
Secondary Contact: Anthony Walker, Melbourne +  61 3 9631 2019; 
                   anthony.walker@spglobal.com 
 
 
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