Katherine Bateman of John Nuveen & Co. and Patrick Hennigan of J.P. Morgan Securities tied for first-team honors in the Higher Education sector.
Hennigan, who has moved onto the investment banking department at JPMS, was last year's first team analyst in the sector,
The fact that Nuveen's Bateman tied Hennigan is evidence that his strong following is ebbing. Hennigan, pleased that he was elected again, noted that he continues to work with institutional investors and makes presentations on the sector.
Bateman is head of the National Federation of Municipal Analysts' group to determine the information needs in the primary and secondary markets.
She reported that results of the NFMA's study will be available in the next three months.
The process of determining information requirements in financial reporting for higher education credits was done as part of a study sponsored by Peat Marwick, Bateman said.
About fifty people participated in the study, Bateman said, and they represented college financial officers, usually the certified public accountants that prepare the information; investors and analysts; members of accrediting groups, that represent college professors; and state agencies.
"We arrived at the bottomline about the amount of data each group accepts as sufficient or able to produce," Bateman said.
The process of commenting on the requirements went through three rounds. The key points were how to list restricted and unrestricted funds, endowment trends, debt history in the industry, and student demand information.
Bateman explained that student demand information should include items such as the number of applicants, number of acceptances, and number of enrollments.
Results of the study will be used by the National Association of College and University Business Officers.
"I think it's important that analysts are being included in these study groups," Bateman said.
In the secondary market, ongoing disclosure will be taken from the annual audits of higher education instructions.
The annual audits provide issuers with current fund balances, balance sheets and footnotes that break out the debt history and principal outstanding.
Overall, Bateman expects the volume of bonds issued in the higher education sector of the municipal securities industry to increase.
Nuveen recently produced a report that showed three-year trends, Bateman said, which shows the increased indebtedness of higher education institutions.
The concerns about indebtedness are mitigated by the fact the demographic pressures that produced fewer high school graduates over the past ten years in beginning to wane.
In 1992, the demographics will begin to shift toward higher graduation levels. "Most of the shakeouts have already happened," Bateman said, which means the tough times for administrators and admissions officers could be almost over.
As the pressure continues, however, education officers need to pay attention to tuition costs in their areas.
If they are at the median or slightly below, they have greater flexibility in meeting potential problems by raising interest rates. If they are above the median, then they must look to cut costs.
J.P. Morgan's Hennigan added that unplanned for enrollment reductions probably are the toughest to deal with. "You can take transfer students or cut expenses," he said.
Hennigan feels that changes in the federal guidelines about what are allowable chargeback expenses could impact credit quality and need to be monitored.
Additionally, Hennigan believes it will take a number of years for states to pull out of the recession.
Given the broad contractions in revenues, he recommends that issuers be "proactive, rather than reactive, by going to investors and rating agencies and telling them in advance about your plans to cope with revenue contractions."
