Fitch Ratings affirms the following series of revenue financing system (RFS) bonds issued by the Board of Regents of The Texas A&M University System (TAMUS):
--Approximately $106,685,000 RFS bonds, series 2009C 'AA+';
--Approximately $378,110,000 RFS bonds, series 2009D 'AA+'.
The series 2009C and 2009D bonds (the bonds) were originally rated by Fitch on Oct. 5, 2009 in the amount of approximately $375,000,000. Proceeds of the bonds were originally expected to fund various capital improvement plan projects and bond issuance costs. However, as a result of favorable market conditions, the par amount of both series was increased to permit partial refunding of outstanding debt for interest rate savings. Up to $49.8 million of the series 2009C bonds may be applied to refund portions of outstanding RFS bonds classified as tuition revenue bonds (TRBs), while up to $66.8 million of the series 2009D bonds may be applied to refund portions of RFS bonds not eligible for TRB designation. The bonds are expected to now sell on or about Oct. 19.
At the same time, Fitch affirms the unenhanced 'AA+' rating on approximately $1.1 billion of outstanding parity RFS bonds and the 'F1+' rating on TAMUS' tax-exempt commercial paper (CP) program authorized in a maximum amount of $300 million. Approximately $16.2 million of CP notes is currently outstanding under the CP program which TAMUS uses as a source of interim financing for capital projects.
The 'AA+' rating reflects TAMUS' significant balance sheet liquidity, supported by consistently strong operating performance and fairly conservative investment management practices; solid demand, evidenced by increasing enrollment levels and considerable admissions flexibility; and an experienced management team, with a demonstrated track record in financial and strategic planning.
Offsetting credit characteristics include TAMUS' somewhat higher reliance upon state appropriations for operations than is typical for an 'AA+' rated public university; uncertainty regarding future appropriation levels as the state of Texas (general obligation bonds rated 'AA+' by Fitch) faces mounting economic pressure; moderate vulnerability to financial market turbulence which could further erode or severely limit appreciation of invested fund balances;and ongoing capital needs typical of a system of TAMUS' size and operating scope.
The 'F1+' rating is based upon the immediate availability of high-quality, highly liquid resources to support a failed roll-over of maturing CP notes under TAMUS' CP program.
RFS debt is secured by pledged revenues which essentially include legally available, unencumbered funds and balances of TAMUS. RFS debt classified as non-self-supporting TRBs are eligible for an additional appropriation equal to TRB debt service from the state of Texas. Following issuance of the bonds, approximately 40% of the TAMUS debt portfolio will be classified as TRBs and will be eligible for the state debt service offset. Maximum annual debt service on RFS debt will total approximately $153 million (fiscal 2011) following the issuance of the bonds, comprising approximately 5.0% of fiscal 2008 revenues.
Additional information is available at 'www.fitchratings.com'.
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Contacts:
Fitch Ratings, New York
Douglas J. Kilcommons, +1-212-908-0740
Eric
Kim, +1-212-908-0527
Media Relations
Cindy Stoller,
+1-212-908-0526
cindy.stoller@fitchratings.com
