1. Assessing Higher Education Credit Risk International Forum on Investment in Private Higher Education Susan Fitzgerald, Sr.Vice President susan.fitzgerald@moodys.com Elizabeth Veasey, Analyst elizabeth.veasey@moodys.com Moody’s Investors Service February, 2003

2. 2 Moody’s Higher Education Ratings Group u 10 Analysts: NY, Dallas, SF u Ratings: u 270 private colleges/universities: u 15% of total market, 85% of colleges with revenues above $100 million u $36 billion of outstanding debt u 170 public colleges, universities, and systems: u 90% of total market u $44 billion of outstanding debt u International: Canada, UK, Chile, Spain

3. 3 (underlying/unenhanced only) Moody's Portfolio By Segment (underlying/unenhanced only) u Total rated dollar volume $18.9 billion in 2003 u Public Universities borrowed $11 billion u Private Colleges borrowed $6 billion u Other non-profit organizations borrowed $3 billion

4. 4 Borrowing To Modernize & Compete

5. 5 Investment in Strategic Core Business Drives Borrowing

6. 6 Higher Education Credit Analysis u Credit analysis is both quantitative and qualitative. u Key factors are: u market position u financial resources u operating performance, cash flow, and debt service coverage u state relationship and regulatory environment u debt position, capital funding sources u strategy and management

7. 7 Several Factors Currently Straining Credit Quality

8. QUESTIONS & ANSWERS