Fitch Ratings assigns an ''AA'' rating to the approximately $56.6 million of University System of Maryland''s (USM) auxiliary facility and tuition revenue bonds, 2009 refunding series D. The bonds are scheduled to sell competitively on or about Sept. 23, 2009. At the same time, Fitch affirms the ''AA'' rating on USM''s approximately $845.7 million of outstanding auxiliary facility and tuition revenue bonds. The Rating Outlook is Stable.

The 2009 series D bonds, which rank on parity with outstanding auxiliary facility and tuition revenue bonds, are a limited obligation of USM payable solely from tuition revenues and net auxiliary facility fees. Proceeds of the bonds will be used to refund portions of USM''s outstanding series 2001A, 2001B, 2002A, and 2003A bonds.

The ''AA'' rating reflects USM''s prominent position as the state''s sole public university system; sound financial operations, bolstered by revenue diversity and prudent management practices; strong financial support provided by the state of Maryland (rated ''AAA'' by Fitch); and solid demand trends. Primary credit concerns include USM''s limited, though improving, liquidity; potential increases in capital spending and debt burden to accommodate future enrollment growth and facility renewal and replacement needs; and the potential for future state funding reductions due to the economic slowdown, although this risk is partially mitigated by the depth and diversity of Maryland''s economy and its historical commitment to funding public higher education.

USM''s financial profile remains a key credit strength. USM generated operating surpluses over the past five fiscal years. USM''s operating margin was 3.8% in fiscal 2008 based on operating revenues of $3.8 billion. USM also benefits from significant state support for capital projects, which enables it to maintain manageable debt levels and accumulate financial resources for capital needs. Management expects a modest increase in unrestricted net assets for fiscal 2009 once audited financial statements are completed, with an approximate increase of $100 million to USM''s cash balances.

While state funding was reduced slightly in fiscal 2009, due to the economic slowdown, the state appropriated $1.06 billion for USM, a 5.7% increase from fiscal 2008. For fiscal 2010, the state appropriated approximately $1.09 billion for USM, a 3.3% increase. In response to state-mandated budget cuts across statewide institutions, USM''s fiscal 2010 financial resources were reduced by approximately $97 million through a mix of fund transfers back to the state, reduced state-appropriated funds, and required employee furloughs. However, these budget reductions will be partially offset by reduced spending to include the elimination of vacant staff positions, temporary salary reductions, reduced financial aid, and delayed capital spending.

USM''s balance sheet resources have grown over the past several years. Available funds, defined by Fitch as unrestricted and temporarily restricted cash and investments, were $1.14 billion in fiscal 2008, up from $616.6 million in fiscal 2004. Available funds consist mainly of cash and short-term investments on deposit with the state Treasurer.

After issuance of the 2009 series D bonds, USM''s direct debt outstanding will total approximately $952.3 million and maximum annual debt service of approximately $117.6 million would consume a low 3.1% of fiscal 2008 operating revenues. USM plans to issue approximately $115 million of additional debt per year for the next five years. Concerns regarding the system''s capital plans are mitigated by its conservative fixed-rate structure and 20-year principal amortization for revenue bonds, coupled with a manageable pro forma debt burden.

USM''s fall 2009 full-time equivalent enrollment is estimated at 109,236 (excluding overseas programs), a modest increase from 107,712 students in fall 2008. For more information on USM, refer to Fitch''s most recent credit report dated June 15, 2009.

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:

Fitch Ratings, New York
Colin Walsh, 212-908-0767
Mary Catherine Messner, CFA, FRM, 212-908-0738
or
Cindy Stoller, 212-908-0526 (Media Relations)
cindy.stoller@fitchratings.com