Fitch rates approximately $183.3 million Board of Regents of Texas Tech University System (the system) revenue financing system (RFS) refunding and improvement bonds twelfth series (2008) 'AA'. The series 2008 bonds are expected to price on or about October 24 via negotiated sale. At the same time Fitch affirms the outstanding ratings on $389 million of RFS refunding and improvement bonds at 'AA' and confirms the rating on the $150 million RFS tax exempt and taxable commercial paper (CP) program at 'F1+'.
RFS debt, including notes issued under the CP program, is secured by all available funds of the system. The Rating Outlook is Stable.
Proceeds of the 2008 bonds will fund approximately $81.8 million of system capital projects; refinance $53.7 million of outstanding CP notes issued under the system's tax exempt CP program, which is being expanded from a maximum authorization of $100 million to $150 million and to include taxable CP; and refund approximately $47.8 million of outstanding RFS debt, including approximately $7.7 million of bonds issued by the Texas State University System (TSUS, RFS bonds rated 'AA-' by Fitch) on behalf of Angelo State University, a former member of TSUS which was officially transferred by the state of Texas to the system effective Sept. 1, 2007.
The 'AA' rating reflects the breadth and diversity of system operations, which encompass academic institutions and a health sciences center, coupled with a strong market position in West Texas; a track record of generally stable headcount despite turnover in the enrollment management office; strong operating performance, evidenced by operating margins which are consistently above the public university 'AA' category median; considerable revenue diversity, with none of the system's primary sources of funding comprising greater than 26% of total operating funds; sound balance sheet liquidity, supported by conservative management practices; and an experienced management team.
Credit concerns center principally upon the fairly significant increase in financial leverage resulting in a moderate, though manageable, debt burden; the potential financial and operating challenges associated with the system's plan to steadily increase student enrollment and fund research over the near- to intermediate-term; and the potential for near-term declines in system liquidity associated with recent severe financial market volatility.
The 'F1+' rating reflects the pool of high-quality, highly liquid cash and marketable securities available to support a failed rollover of CP notes. As of May 31, 2008, the system's short/intermediate term fund (S/ITF), its primary source of liquidity, totaled $587.5 million. The largest concentration of S/ITF holdings is in TexPool (48%), a high-quality investment pool used by local governments within the state. TexPool invests primarily in short-duration U.S. government securities, repurchase agreements, and money market mutual funds.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
Contacts:
Douglas J. Kilcommons, +1-212-908-0740
Cindy
Stoller, +1-212-908-0526 (Media Relations)
