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Rating Action:

Moody's Upgrades UNC at Wilmington's Bonds to Aa3 and A1 & Assigns A1 to Series 2016 Bonds; Outlook Stable

Global Credit Research - 18 May 2016

New York, May 18, 2016 -- Issue: Refunding Limited Obligation Bonds, Series 2016; Rating: A1; Rating Type: Underlying LT; Sale Amount: $57,580,000; Expected Sale Date: 06/09/2016; Rating Description: Revenue: Public University Limited Pledge;

Summary Rating Rationale

Moody's Investors Service has upgraded the University of North Carolina at Wilmington's (UNCW) $14 million general revenue bonds and $21 million Series 2010D pool revenue bonds to Aa3 from A1. We also upgraded the $118 million rated outstanding limited obligation bonds and Certificates of Participation to A1 from A2. We have concurrently assigned an A1 to the proposed $58 million in Refunding Limited Obligation Bonds, Series 2016, to be issued through the UNCW Corporation and expected to mature in 2038. The outlook is stable.

The upgrade reflects UNCW's important role as a favorably located public university and constituent member of the University of North Carolina System, with strong state financial support, growing financial reserves, and overall strengthening student demand. It also incorporates expectations of continued growth of wealth and operating revenue, which when combined with regular principal payments, will result in diminished leverage.

Offsetting challenges include high debt burden and relatively modest wealth levels compared to Aa3 peers, and limitations on out-of-state student enrollment and tuition setting.

Rating Outlook

The stable outlook reflects expectations that UNCW will maintain strong student demand and state support, leading to consistent revenue growth and ample cash flow generation in the 12-14% range. It also incorporates expectations of ongoing financial reserve growth and no additional borrowing plans, resulting in a continued improvement of the university's leverage position.

Factors that Could Lead to an Upgrade

Significant and sustained growth in wealth providing a stronger cushion to debt and operations

Substantial improvement in revenue diversity

Factors that Could Lead to a Downgrade

Sustained decline in the State of North Carolina's credit quality or reduced state financial support

Material weakening of liquidity

Softening student demand leading to weak net tuition revenue growth and weaker cash flow

Additional borrowing without commensurate growth in cash and investments

Legal Security

The general revenue bonds and system pool revenue bonds are unsecured general obligations of the university, payable from available funds. These include all unrestricted general fund and unrestricted quasi-endowment fund balances, except for those derived from tuition, state appropriations, or restricted funds. UNCW is the sole obligor for the Series 2010D Pool Revenue Bonds. The general revenue and pool revenue bonds have first priority of payment over the limited obligation bonds.

The Series 2016 and other limited obligation securities are paid solely from 1) net project revenues, and 2) dormitory, dining, and parking systems revenue once the university's general revenue debt has been paid. The university maintains ample headroom above the 1.1 times debt service coverage covenant, measured at 4.4 times in FY 2015. Further security for bondholders is provided through an additional bonds test.

The Series 2008 obligations are further secured by a reserve fund requirement, met with an insurance policy from Assured Guaranty Municipal Corp.

Use of Proceeds

The Series 2016 bonds are being issued to refund the 2008 Certificates of Participation and pay issuance costs.

Obligor Profile

UNCW, a mid-sized regional public university and constituent member of the University of North Carolina System, is situated in coastal North Carolina. It offers a comprehensive list of undergraduate, graduate, certificate, and online offerings, with notable programs in marine sciences, education, and nursing. The university served 13,784 full-time equivalent students in fall 2015 and had FY 2015 operating revenues of $285 million.

Methodology

The principal methodology used in this rating was Global Higher Education published in November 2015. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

Regulatory Disclosures

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Christopher Collins
Lead Analyst
Higher Education
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
US
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Eva Bogaty
Additional Contact
Higher Education
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Upgrades UNC at Wilmington's Bonds to Aa3 and A1 & Assigns A1 to Series 2016 Bonds; Outlook Stable
No Related Data.
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