$588M pro forma rated debt, including CP at full $150M authorization
New York, March 10, 2015 --
Moody's Rating
Issue: Revenue Finance System Revenue and Refunding Bonds,
Tax-Exempt Series 2015A; Rating: Aa1; Sale Amount:
$75,125,000; Expected Sale Date: 03-17-2015;
Rating Description: Revenue: Public University Broad Pledge
Issue: Revenue Finance System Revenue and Refunding Bonds,
Taxable Series 2015B; Rating: Aa1; Sale Amount:
$246,880,000; Expected Sale Date: 03-17-2015;
Rating Description: Revenue: Public University Broad Pledge
Opinion
Moody's Investors Service assigns Aa1 ratings to Texas Tech University
System's (TTUS or the system) $322 million of fixed rate Revenue
Finance System Revenue and Refunding Bonds (RFS), 2015A (Tax-Exempt,
maturing in 2044) and 2015B (Taxable, maturing in 2044).
An estimated $107 million of the RFS bonds is expected to be used
to refund a portion of the system's Commercial Paper (CP, rated
P-1) program, $35.2 million is for new money
and the remainder is expected to be used for refunding. The outlook
is stable.
SUMMARY RATING RATIONALE
The Aa1 rating reflects the system's ongoing steady growth of financial
resources through fundraising and consistently positive operations,
coupled with growing enrollment in line with the system's strategic plan.
Further supporting the Aa1 rating is healthy state operating and capital
support, a substantial scale of operations ($1.6 billion
of revenue over four campuses), growing brand recognition with increasing
research, and a conservative approach to financial leverage.
Challenges facing TTUS are managing the pace of growth and some continued
geographic concentration with over 90% of undergraduates drawn
from within Texas.
The P-1 rating on the system's Revenue Financing System Tax Exempt
and Taxable Commercial Paper Notes, Series A is based on the system's
own liquidity.
OUTLOOK
The stable outlook reflects expectations that TTUS's positive operations
and stable state support, with prudent fiscal stewardship,
will allow the system to achieve enrollment goals with limited additional
borrowing.
WHAT COULD MAKE THE RATING GO UP
- Significant growth in flexible reserves
- Ongoing notable strengthening of brand as evidenced by even stronger
student demand, research growth and sustained heightened philanthropy
WHAT COULD MAKE THE RATING GO DOWN
- Downgrade of state or substantial decline in state operating
or capital support
- Changes in capital funding strategy, with increasing financial
leverage
- Material declines in financial resources
OBLIGOR PROFILE
Texas Tech University System includes the TTUS system administration located
in Lubbock, Texas, and four component institutions:
Texas Tech University, Texas Tech University Health Sciences Center,
Angelo State University, and Texas Tech University Health Sciences
Center at El Paso. The system operates satellite locations around
the state. In FY 2014, the system recorded operating revenues
of $1.6 billion and served a headcount enrollment of nearly
47,000 students.
LEGAL SECURITY
The RFS debt is secured by a broad pledge of revenues, including
tuition, fees, and auxiliary revenues, and certain unappropriated
funds and reserve balances but excluding state appropriations, practice
plan funds, and other restricted funds. Pledged Revenues
in FY 2014 totaled $1.3 billion, providing 20 times
coverage of maximum annual debt service.
USE OF PROCEEDS
Proceeds of the Series 2015A and 2015B RFS bonds are expected to be used
to: (1) fund various campus projects; (2) refinance outstanding
CP; (3) refund all or portions of outstanding Series 2003 and Series
2006 RFS bonds, plus a portion of the Angelo State University notes;
and (4) pay costs of issuance. There is no debt service reserve
fund for the Series 2015A and 2015B RFS bonds.
RATING METHODOLOGY
The principal methodology used in this rating was U.S. Not-for-Profit
Private and Public Higher Education published in August 2011. Please
see the Credit Policy 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 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.
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.
Mary Cooney
Asst Vice President - 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
Susan I Fitzgerald
Senior Vice President
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 assigns Aa1 to Texas Tech University System's $322M Series 2015A&B Bonds; outlook stable