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Rating Action:

Moody's affirms West Virginia University Foundation's Aa2 issuer rating and Aa2/VMIG1 bond rating; outlook is stable

30 Apr 2013

Foundation has $3 million of rated debt outstanding

New York, April 30, 2013 -- Moody's Investors Service has affirmed the Aa2 issuer rating and the Aa2/VMIG1 ratings on the West Virginia University Foundation's (WVUF) Series 2002A bonds issued through the West Virginia Economic Development Authority. The rating outlook is stable.

SUMMARY RATING RATIONALE

The Aa2 rating and stable outlook reflect the foundation's close ties with West Virginia University (WVU) (limited pledge revenue bonds rated Aa3/Stable), as well as excellent balance sheet coverage of debt and operations, strong fund-raising, and exceptional liquidity. The rating also reflects the foundation's dependence on gift revenue and investment income to support mission and operations as well as the ongoing financial health of the university.

The short-term VMIG 1 rating reflects the support of a Standby Bond Purchase Agreement (SBPA) from PNC Bank, N.A. (rated A2/P-1) for the tender features of the variable rate bonds.

STRENGTHS

*Well established relationship with West Virginia University which has experienced growing enrollment and donor support as well as ongoing operating support from the Aa1-rated state of West Virginia. The foundation provides support for WVU, WVU hospitals, WVU Research Corporation, and other WVU affiliated agencies.

*Strong financial resources, with total resources surpassing FY 2008 highs at $571 million as of fiscal year (FY) 2012, due to strong philanthropic support. Expendable financial resources of $186 million provide ample coverage of debt and operations at 5.0 times and 3.1 times, respectively.

*Robust fund-raising with total gift revenue of $87 million in FY 2012. Over the last three years, gift revenue has averaged $76 million per year.

*Ample unrestricted monthly liquidity of $114 million as of FY 12 provides over 711 days coverage of operating expenses and 4.2 times coverage of demand debt.

CHALLENGES

*Heavy dependence on gift revenue and investment income, representing 58% and 35% of total operating revenue respectively in FY 2012, exposes the foundation to volatility in investment markets and ongoing donor support.

*Potential calls for increased support for WVU could reduce operating margins and unrestricted financial resources, which at $6.7 million was only 1.2% of total financial resources as of FY 12.

*Ongoing need to maintain investment portfolio management and due diligence processes from a relatively lean internal team with oversight of experienced investment committee of the Board.

Outlook

The stable outlook reflects Moody's expectation that West Virginia University Foundation will continue to maintain its balance sheet strength, strong philanthropic support, a productive working relationship with WVU. The outlook also reflects the stable outlook on West Virginia University.

WHAT COULD MAKE THE RATING GO UP

Significant growth in financial resources; continued growth of donor support; material investment losses; upgrade of university's rating.

WHAT COULD MAKE THE RATING GO DOWN

Decline in balance sheet cushion or liquidity; reduction in donor support; downgrade of university's rating.

WHAT COULD CHANGE THE SHORT TERM RATING DOWN

The short-term rating on the bonds would be downgraded if Moody's were to downgrade the short-term rating of the PNC Bank, and could be downgraded if Moody's were to downgrade the long-term rating of the bonds.

RATING METHODOLOGY

The rating of University of West Virginia Foundation was assigned by evaluating factors believed to be relevant to its credit profile such as 1) the business risk and competitive position of the issuer versus others within its industry or sector, ii) the capital structure and financial risk of the issuer, iii) the projected performance of the issuer over the near to intermediate term, iv) the issuer's history of achieving consistent operating performance and meeting budget or financial plan goals, v) the nature of the dedicated revenue stream pledged to the bonds, vi) the debt service coverage provided by such revenue stream, vii) the legal structure that documents the revenue stream and the source of payment, and vii) the issuer's management and governance structure related to payment. In addition, the Variable Instruments Supported by Third-Party Liquidity Providers methodology published in November 2006 was also used in assessing the short-term rating.

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 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 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.

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.

Michael Gusta
Associate Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Dennis M. Gephardt
Vice President - Senior Analyst
Public Finance Group
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 affirms West Virginia University Foundation's Aa2 issuer rating and Aa2/VMIG1 bond rating; outlook is stable
No Related Data.
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