Fitch affirms its rating of 'A+ on the University of
Oklahoma's (OU, or the university) student housing revenue bonds,
series 2004. The Rating Outlook is Stable.
Credit strengths include stable enrollment on the OU Norman campus enrolls approximately 27,000 students and limited university housing capacity. The housing bonds are secured by a pledge of the net revenues of the housing and food services department. Housing debt in the future will be secured by a broader revenue pledge of the university. No additional bonds will be issued on parity with the series 2004 student housing bonds.
Net revenues for fiscal 2005 were $6.2 million and covered debt service by 5.8 times (x). However, the $6.2 million does not include debt service on the series 2004 bonds, which begins in fiscal 2006 at $1.9 million. The first full year of debt service of $3.8 million occurs in fiscal 2007. Net revenues are projected to be $8.2 million in fiscal 2006 and $10.7 million in fiscal 2007 providing debt service coverage of 2.8x and 2.2x, respectively. OU's regents covenant to provide sufficient net revenues to cover debt service at least 1.25x annually.
The major credit concerns are the decline in occupancy levels for the last two years and the state's weak demographics for young adults. The projected change in the number of high school graduates between now and 2017 is 1%. Approximately 70% of OU's students come from the state. However, mitigating the weak demographics of Oklahoma is the fact that approximately 23% of OU's students come from Texas where the projected growth rate is 16%. Enrollment stability is critical to maintaining housing occupancy levels. For the last two fiscal years, occupancy for university housing has declined from 88.7% for fiscal 2004 to 79.8% for fiscal 2006. OU largely attributes the decline to a decline in the freshmen class. The preliminary fall 2006 freshmen class is approximately 100 students higher than the fall 2005 class, which should translate into a slightly higher occupancy level. Fitch believes that even with the occupancy declines, the required debt service coverage of 1.25x is achievable.
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.
Credit strengths include stable enrollment on the OU Norman campus enrolls approximately 27,000 students and limited university housing capacity. The housing bonds are secured by a pledge of the net revenues of the housing and food services department. Housing debt in the future will be secured by a broader revenue pledge of the university. No additional bonds will be issued on parity with the series 2004 student housing bonds.
Net revenues for fiscal 2005 were $6.2 million and covered debt service by 5.8 times (x). However, the $6.2 million does not include debt service on the series 2004 bonds, which begins in fiscal 2006 at $1.9 million. The first full year of debt service of $3.8 million occurs in fiscal 2007. Net revenues are projected to be $8.2 million in fiscal 2006 and $10.7 million in fiscal 2007 providing debt service coverage of 2.8x and 2.2x, respectively. OU's regents covenant to provide sufficient net revenues to cover debt service at least 1.25x annually.
The major credit concerns are the decline in occupancy levels for the last two years and the state's weak demographics for young adults. The projected change in the number of high school graduates between now and 2017 is 1%. Approximately 70% of OU's students come from the state. However, mitigating the weak demographics of Oklahoma is the fact that approximately 23% of OU's students come from Texas where the projected growth rate is 16%. Enrollment stability is critical to maintaining housing occupancy levels. For the last two fiscal years, occupancy for university housing has declined from 88.7% for fiscal 2004 to 79.8% for fiscal 2006. OU largely attributes the decline to a decline in the freshmen class. The preliminary fall 2006 freshmen class is approximately 100 students higher than the fall 2005 class, which should translate into a slightly higher occupancy level. Fitch believes that even with the occupancy declines, the required debt service coverage of 1.25x is achievable.
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.