Fitch rates education bonds

by Wally Northway

Published: September 10,2009

JACKSON — Fitch Ratings assigns an “AA-” rating to the University of Mississippi (UM) Educational Building Corporation’s (EBC) approximately $15.2 million of revenue bonds, series 2009C-1 (Residential College Project – Phase II) and Build America Bonds, series 2009C-2 (Residential College Project – Phase II, Federally Taxable Build America Bonds) (collectively, the bonds).

A portion of the bonds may be sold as taxable Build America Bonds. The bonds are scheduled to sell the week of Sept. 28, 2009 through a negotiated process.

Fitch also affirms the “AA-” rating on approximately $125.7 million in outstanding UM EBC bonds and $162.5 million in Mississippi State University (MSU) EBC bonds. The rating outlook on all bonds is “stable.”

Fitch wrote: “The ‘AA-’ rating continues to principally reflect the significant coverage provided by the broad pledge of designated Institutions of Higher Learning (IHL) revenues; the essential role played by each of the IHL members, the state’s eight public academic institutions, in furthering the state’s education, research, and healthcare goals, coupled with the important coordinating role of the IHL board; healthy enrollment growth across IHL academic institutions; sound financial performance of IHL academic institutions; and, low debt levels.

“On-going credit risks include the IHL’s moderate reliance upon state appropriations; a somewhat limited ability to handle state funding reductions with sizeable increases in student tuition and fees given the state’s goal of ensuring access and affordability of higher education to state residents; and exposure to variable-rate demand debt. The IHL’s most significant remaining variable-rate debt exposure is for University of Mississippi Medical Center (UMMC) EBC bonds. Fitch notes that these bonds will not negatively affect designated revenues, as UMMC revenues and balances are excluded from the pledge.”

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