ACTION AFFECTS $652 MILLION OF RATED DEBT OUTSTANDING
NEW YORK, Aug 11, 2011 -- Moody's Investors Service has placed the University of Puerto Rico's ratings on
Watchlist for possible downgrade. The rating action affects $652 million of
rated debt issued through AFICA. We expect to conclude our review within 90
SUMMARY RATING RATIONALE
This action follows the downgrade of the Commonwealth of Puerto Rico to Baa1
with a negative outlook from A3 with a negative outlook on August 8, 2011. The
University is heavily dependent on the Commonwealth support for more nearly 75%
of fiscal year (FY) 2010 operating revenues. The University's very strong market
position as the only public higher education institution in Puerto Rico, and its
role in economic development, remains significant credit strength.
During our review period, we will assess the University's relationship with the
Commonwealth and expectations for future financial support, the governance and
management of the University, and future strategic, capital and debt plans. The
outcome of the review process could result in a rating downgrade of more than
one rating level.
DETAILED CREDIT DISCUSSION
LEGAL SECURITY: The Pledged Revenue Bonds, rated Baa1, are secured by a pledge
of tuition and student fees, other auxiliary revenues, investment income,
indirect cost recoveries and other unrestricted income. The University has
covenanted to use Commonwealth appropriations to fund debt service if other
revenues are insufficient. There is a fully funded debt service reserve fund. In
FY 2010, Pledged Revenues provided 2.7 times debt service coverage.
The 2000 Series A Bonds, rated Baa2, are subordinate bonds secured by lease
payments of the University, with a subordinate pledge of tuition and other
restricted revenues. In FY 2010, debt service coverage was 2.4 times for the
2000 Series A bonds.
KEY INDICATORS (FY 2010 financial results; Fall 2010 enrollment):
Total Enrollment: 62,342 Headcount Students
Total Comprehensive Debt: $739 million
Expendable Financial Resources: -$89.2 million
Total Cash and Investments: $247.1 million
Expendable Financial Resources to Debt: -0.12 times
Expendable Financial Resources to Operations: -0.07 times
Reliance on Commonwealth funding: 74.7%
Commonwealth of Puerto Rico: rated Baa1, negative
Pledged Revenue Bonds, Series C, D, N, O, P, Q: Baa1 rating
AFICA, 2000 Series A Bonds (University Plaza Project) (subordinate lien): Baa2
Government Development Bank of Puerto Rico: (787) 722-2525; Jose R
Otero-Freiría, Executive Vice President - Financing; Juan M. Roman Rivera,
Executive Vice President and Fiscal Agent
University: Dr. Miguel A. Muñoz, President, (787) 232-9597
PRINCIPAL RATING METHODOLOGY
The principal methodology used in this rating was Public College and
Universities published in November 2006. Please see the Credit Policy page
on www.moodys.com for a copy of this methodology.
For ratings issued on a program, series or category/class of debt, this
announcement provides relevant regulatory disclosures in relation to each rating
of a subsequently issued bond or note of the same series or category/class of
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existing ratings in accordance with Moody's rating practices. For ratings issued
on a support provider, this announcement provides relevant regulatory
disclosures in relation to the rating action on the support provider and in
relation to each particular rating action for securities that derive their
credit ratings from the support provider's credit rating. For provisional
ratings, this announcement provides relevant regulatory disclosures in
relation to the provisional rating assigned, and in relation to a
definitive rating that may be assigned subsequent to the final issuance of the
debt, in each case where the transaction structure and terms have not
changed prior to the assignment of the definitive rating in a manner that
would have affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
Information sources used to prepare the rating are the following: parties
involved in the ratings, parties not involved in the ratings, public
information, and confidential and proprietary Moody's Investors Service
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Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Diane F. Viacava
Public Finance Group
Moody's Investors Service
Public Finance Group
Moody's Investors Service
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
MOODY'S PLACES UNIVERSITY OF PUERTO RICO'S RATINGS ON WATCHLIST FOR POSSIBLE DOWNGRADE
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