Fitch Ratings assigns an 'AAA' rating to the Board of
Regents of The University of Texas System (U.T. System) permanent
university fund (PUF) refunding bonds, series 2006. The bonds will be
sold through Lehman Brothers. Bond proceeds will be used to refund
outstanding series 1996 PUF bonds scheduled to mature in fiscal years
2007-2010. The Rating Outlook is Stable.
Fitch also affirms the 'AAA/F1+' rating on The Board of Regents of The Texas A&M System (A&M System) PUF flexible-rate notes (FRNs). The maximum amount of notes to be outstanding has been increased to $125 million from $80 million.
The 'AAA' rating is supported by the PUF's vast investment holdings, which had a market value of $9.8 billion on Jan. 31, 2006. The Texas constitution requires that funds be distributed annually from the PUF to pay bond and note debt service on debt issued by U.T. System and the A&M System. The U.T. System receives two-thirds of the PUF's annual distributions and the A&M System receives one-third. The annual distributions are made under policies of the U.T. System Board of Regents pursuant to the current endowment distribution policy of 4.75%. For fiscal year 2005 the distribution was $349.5 million. U.T. System's distribution covered PUF bond and note debt service by 3.76 times (x) and coverage of the A&M's system PUF debt was 3.54x.
Under the constitution, U.T. System PUF debt may not exceed 20% of the cost value of the PUF ($8.66 billion as of Aug. 31, 2005) at the time of issuance. The A&M System's debt limit is 10% of the cost value of the PUF. Total U.T. System PUF debt outstanding is $1.1 billion. Total PUF debt outstanding for the A&M System is $308.9 million.
The short-term rating of 'F1+' on the A&M System's FRNs is based on the ability of A&M System resources, including its share of the PUF, to cover maximum liquidity demands. Upon notification of a failed remarketing, the A&M System would notify the University of Texas Management Company (UTIMCO), which agrees pursuant to a security agreement to purchase notes as investments for the PUF on the same day or by the following business day. If the purchase date is the next business day, the A&M System would use non-PUF resources to acquire unremarketed notes. As of Nov. 30, 2005, the A&M System's highly liquid money market fund and U.S. government fixed-income investments totaled $457.3 million, providing 1.8x coverage of maximum liquidity demands of the A&M System's two short-term obligation programs: $125 million PUF FRNs and $125 million of revenue financing system commercial paper. In addition, the maximum amount of PUF FRNs that can be due on any given day is limited to $10 million.
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.
Fitch also affirms the 'AAA/F1+' rating on The Board of Regents of The Texas A&M System (A&M System) PUF flexible-rate notes (FRNs). The maximum amount of notes to be outstanding has been increased to $125 million from $80 million.
The 'AAA' rating is supported by the PUF's vast investment holdings, which had a market value of $9.8 billion on Jan. 31, 2006. The Texas constitution requires that funds be distributed annually from the PUF to pay bond and note debt service on debt issued by U.T. System and the A&M System. The U.T. System receives two-thirds of the PUF's annual distributions and the A&M System receives one-third. The annual distributions are made under policies of the U.T. System Board of Regents pursuant to the current endowment distribution policy of 4.75%. For fiscal year 2005 the distribution was $349.5 million. U.T. System's distribution covered PUF bond and note debt service by 3.76 times (x) and coverage of the A&M's system PUF debt was 3.54x.
Under the constitution, U.T. System PUF debt may not exceed 20% of the cost value of the PUF ($8.66 billion as of Aug. 31, 2005) at the time of issuance. The A&M System's debt limit is 10% of the cost value of the PUF. Total U.T. System PUF debt outstanding is $1.1 billion. Total PUF debt outstanding for the A&M System is $308.9 million.
The short-term rating of 'F1+' on the A&M System's FRNs is based on the ability of A&M System resources, including its share of the PUF, to cover maximum liquidity demands. Upon notification of a failed remarketing, the A&M System would notify the University of Texas Management Company (UTIMCO), which agrees pursuant to a security agreement to purchase notes as investments for the PUF on the same day or by the following business day. If the purchase date is the next business day, the A&M System would use non-PUF resources to acquire unremarketed notes. As of Nov. 30, 2005, the A&M System's highly liquid money market fund and U.S. government fixed-income investments totaled $457.3 million, providing 1.8x coverage of maximum liquidity demands of the A&M System's two short-term obligation programs: $125 million PUF FRNs and $125 million of revenue financing system commercial paper. In addition, the maximum amount of PUF FRNs that can be due on any given day is limited to $10 million.
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.