Fitch Ratings upgrades the rating on approximately $45 million of outstanding certificates of participation Golden Knights Corporation (GKC) Master Lease Program, series 2006A, to 'A+' from 'A-'. The Rating Outlook is Stable.
RATING RATIONALE:
--The rating upgrade reflects the strength of the support agreement provided by the University of Central Florida (UCF), which is an unconditional obligation payable from legally available revenues, to make up deficiencies for debt service (DS) payments on behalf of GKC.
--UCF's credit profile has improved over the past four years with solid enrollment growth and operating performance generating consistently positive margins.
-- The rating also recognizes the completion of the football stadium and successful operating history for the past 3 years.
Key Rating Drivers:
--The continued ability of UCF to stand behind the support agreement for the DS payment on behalf of GKC.
SECURITY:
In addition to the support agreement from UCF, the bonds are secured by pledged revenues from the UCF Athletic Association (UCFAA) and net stadium revenues.
CREDIT SUMMARY:
GKC is a direct support organization and component unit of UCF which operates and maintains the Brighthouse Networks stadium (the stadium) for the service and convenience of the university. The stadium has been open and operational since September of 2007. GKC has hosted 20 home games over the past three seasons with an average attendance of 40,585 per game.
Pursuant to a support agreement between UCF and GKC, UCF agrees and covenants to transfer from legally available revenues each year to the trustee, if needed, an amount not to exceed the maximum annual debt service (MADS). UCF's obligation to pay from legally available revenues, if available, is absolute and unconditional. As a result of the support agreement, the rating is primarily based on UCF's ability to meet its obligation.
UCF's fall 2009 headcount enrollment of 53,537, was up 6.4% from fall 2008 and grew 18.7% since fall 2005. For fall 2009, undergraduate full time equivalents (FTE) grew by 4.9% from the previous year. UCF, which received 38.7% of its fiscal 2009 revenues from the state (general revenue bonds of the state rated 'AA+' by Fitch), has generated positive operating margins for the last five years.
UCF's available funds, or total cash and investments not permanently restricted, totaled $194 million at fiscal year end 2009. As a percentage of pro forma financial leverage, available funds remains solid at 77.4%, primarily reflecting the state's historical track record of funding academic infrastructure. Including the contingent liabilities associated with component unit debt support agreements such as the one with GKC, available funds as a percentage of pro-forma debt declines to 35.3%.
UCF's outstanding debt consists primarily of parking facility revenue bonds, housing revenue bonds, and student health center revenue bonds. Total debt outstanding, including capital leases and notes payable, is $236 million. Including GKC and the convocation center total debt increases to $550 million. UCF debt including parking, housing, and healthcare enterprises require annual debt service payments of $23.9 million which comprises 3.3% of operating revenues for fiscal 2009. Through an existing support agreement for the stadium and the convocation center, UCF is annually liable for up to $7.2 million of payments for the convocation center and approximately $4.1 million for the stadium if revenues for each project are insufficient to meet annual DS requirements. When the additional annual aggregate liability of approximately $11.3 million is added to MADS, the debt burden as measured by MADS as a percent of revenues increases to 4.9% and annual debt service coverage decreases to 3.2 times (x) from 4.3x. If no revenues available for DS were generated by the stadium or convocation center, UCF would be able to meet its full obligation assuming net revenues remain at least at the fiscal 2009 level.
Applicable criteria available on Fitch's website at 'www.fitchratings.com' include:
--'Revenue-Supported Rating Criteria' (Dec. 29, 2009);
--'College and University Rating Criteria (Dec. 29, 2009).
Additional information is available at 'www.fitchratings.com'.
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Fitch Ratings, New York
James George, 212-908-0652
Colin
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or
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Email: cindy.stoller@fitchratings.com