Fitch Ratings assigns a 'BBB+' rating to approximately $49 million educational facilities revenue and refunding bonds, series 2012A, to be issued by the Higher Educational Facilities Financing Authority (HEFFA) of the State of Florida on behalf of Nova Southeastern University (NSU). The bonds are expected to sell via negotiation in the month of May. Bond proceeds will be used for capital improvements, bond refinancing and various issuance costs.
Additionally Fitch upgrades the following educational facilities revenue bonds to 'BBB+' from 'BBB':
-- $37.25 million Broward County Educational Finance Authority (BCEFA) series 2002B;
-- $7.3 million BCEFA series 2004A;
-- $20.0 million BCEFA series 2004B;
-- $29.5 million BCEFA variable rate series 2004C (underlying);
-- $99.79 million BCEFA series 2006;
-- $35.2 million HEFFA series 2011.
The Rating Outlook is Stable.
SECURITY
The bonds are secured by pledged revenues which are comprised of tuition, fees and dormitory revenues of the University.
KEY RATING DRIVERS
CONSISTENCY LEADS TO UPGRADE: The rating upgrade to 'BBB+' reflects NSU's ability to generate consecutive years of positive operating margins despite enrollment challenges, maintain and improve liquidity in trying economic conditions and provide solid annual debt service coverage for a growing debt portfolio. Counterbalancing factors include revenue concentration and exposure to variable rate debt.
GROWING BALANCE SHEET RESOURCES: NSU increased available funds in fiscal 2011 to $186 million, the highest level of resources in seven years. The improvement is attributed to reimbursement from bond proceeds for capital expenses, coupled with consistent annual operating surpluses, the latter of which Fitch expects to continue.
CONSIDERABLE VARIABLE RATE EXPOSURE: NSU's exposure to variable rate structures (28% of debt portfolio) poses a risk, which could be exacerbated by LOC provider rating changes. This risk is mitigated by NSU's growing liquid resources, the favorable terms of NSU's bank support agreements, and ability and intent of NSU to fix out its LOC-supported debt as market opportunities arise.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Revenue-Supported Rating Criteria' (June 20, 2011);
--'College and University Rating Criteria' (July 14, 2011);
--'Fitch Affirms Nova Southeastern, FL' (Jan. 10, 2012).
Applicable Criteria and Related Research:
Revenue-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=637130
U.S. College and University Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=640830
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