NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an 'AA' rating to the following series of bonds issued by the Mississippi State University (MSU) Educational Building Corporation (EBC):
--$55,365,000 revenue bonds, series 2011 (Residence Hall Constructions and Refunding Project).
At the same time Fitch affirms the 'AA' rating for the following:
--Approximately $155 million in outstanding MSU EBC bonds;
--Approximately
$125 million in outstanding University of Mississippi (UM) EBC bonds.
A negotiated sale is expected on or about the week of July 4, 2011. The proceeds of the bonds will be used to fund the construction, furnishing and equipping of new residence halls, refund and refinance Mississippi State University Educational Building Corporation Series 2001 Bonds.
The Rating Outlook is Stable.
RATING RATIONALE:
--The 'AA' rating is underpinned by solid
operating performance fueled by sound demand across the Institutions of
Higher Learning (IHL) academic institutions, healthy liquidity, diverse
revenue base and the essential role played by IHL and its member
institutions in furthering the state's education, research, and
healthcare goals.
--Counterbalancing credit factors include the
IHL's moderate reliance on state appropriations and limited ability to
mitigate reductions with tuition increases given the state of
Mississippi's below average wealth levels.
KEY RATING DRIVERS:
--Maintenance of enrollment levels and
operating performance at or near current levels.
--Preservation of
financial flexibility and sound debt service coverage levels.
--Prudent
management of capital expansion and associated debt issuance plans.
SECURITY:
EBC bonds are essentially secured by designated revenues
generated by the eight academic institutions it represents. Designated
revenues include, without limitation, net tuition, fees, and auxiliary
enterprise revenues; sales and services, other operating revenues, state
appropriations, and unrestricted net assets.
CREDIT SUMMARY:
During fiscal 2010, IHL academic institutions and
UMMC generated an operating margin of 2.3%, its fourth surplus over the
past five years. IHL continues to benefit from a diverse revenue base
that enables it to withstand deterioration in any one revenue stream.
State appropriations continue to represent IHL's largest funding source
and accounted for 26% of revenues in fiscal 2010, while healthcare
operations and student fees equal 24.6% and 20%, respectively. Due to
the volatile state funding environment in Mississippi, the state
appropriations share has declined over the past few years, equaling $713
million in fiscal 2010, a 5% decline from fiscal 2009. Fitch believes
that IHL's experienced and proactive management team has demonstrated an
ability to withstand appropriations volatility while maintaining strong
financial performance. IHL anticipates state funding to be relatively
flat in fiscal 2012.
Annual surpluses enabled IHL to augment its available funds to $1.1 billion at the end of fiscal 2010, covering a solid 37% of operating expenses and 115% of total pro-forma debt. The IHL's relatively low debt levels is further evidenced by a debt burden which has been at or around 3% since fiscal 2003, primarily the result of the state of Mississippi's (general obligation bonds rated 'AA+' by Fitch) consistent and significant funding of IHL member institutions (including UMMC) operating and capital needs over time. State capital appropriations are expected to increase 220% from $35 million in fiscal 2010 to $103 million in fiscal 2012.
Founded in 1944, the IHL represents the state's eight academic institutions, including UM, Alcorn State University, Delta State University, Jackson State University, Mississippi State University, Mississippi University for Women, Mississippi Valley State University, and the University of Southern Mississippi. It also includes the University of Mississippi Medical Center, which is part of UM. Enrollment at IHL member institutions totaled 76,886 for fall 2010, increasing, on average, by approximately 2.4% since fall 2006.
Additional information is available at www.fitchratings.com.
In addition to the sources of information identified in the Revenue-Supported Rating Criteria, this action was additionally informed by information from Bank of America Merrill Lynch Global Markets, the university's Underwriter.
Applicable Criteria and Related Research:
--'Revenue-Supported
Rating Criteria' (Oct.8, 2010);
--'College and University Rating
Criteria' (Dec. 29, 2009).
For information on Build America Bonds, visit www.fitchratings.com/BABs.
Applicable Criteria and Related Research:
Revenue-Supported Rating
Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=637130
College
and University Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493170
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.