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Rating Action:

Moody's assigns Aa1 to University System of Maryland's Series 2016A&B bonds; outlook stable

Global Credit Research - 22 Jan 2016

New York, January 22, 2016 -- Issue: Auxiliary Facility and Tuition Revenue Bonds, 2016 Series A; Rating: Aa1; Sale Amount: $140,000,000; Expected Sale Date: 2/3/2016; Rating Description: Revenue: Public University Broad Pledge

Issue: Auxiliary Facility and Tuition Revenue Bonds, 2016 Refunding Series B (Tax Exempt); Rating: Aa1; Sale Amount: $61,330,000; Expected Sale Date: 2/3/2016; Rating Description: Revenue: Public University Broad Pledge

Summary Rating Rationale

Moody's Investors Service has assigned a Aa1 rating to the University System of Maryland's (USMD) approximately $202 million of 2016 Series A and B Auxiliary Facility and Tuition Revenue and Refunding Bonds. The approximately $140 million Series 2016A bonds have a final maturity in 2036. The planned approximately $61.3 million of Series 2016B bonds' anticipated final maturity is in 2030. We have also affirmed the Aa1 rating on parity rated bonds. The outlook is stable.

The Aa1 rating reflects the system's important role as the largest provider of four-year public higher education in Maryland diversified among 12 institutions, with solid operating and capital support from the State of Maryland (Aaa stable), good revenue diversity, and consistent positive operations. These strengths are tempered by state pressure to limit tuition increases, a highly competitive market for students and federal research awards, and potential expense pressure from the state's large unfunded pension liability.

Rating Outlook

The stable outlook reflects expectations of USMD's steady enrollment and positive operating performance, continued growth in financial resources, with manageable plans for future borrowing under the stewardship of a strong management team.

Factors that Could Lead to an Upgrade

Substantial growth in spendable cash and investments to provide stronger support of very large expense base

Continued operating and enrollment strength

Factors that Could Lead to a Downgrade

Continued constrained net tuition growth and resulting weakening of operating performance

Weakening of state support

Legal Security

The Auxiliary Facility and Tuition Revenue Bonds are payable from a broad pledge of tuition revenues and certain auxiliary facility fees, with total pledged revenues of $1.6 billion in FY 2015. The pledged revenues provide a very strong 12 times coverage of maximum annual debt service ($136 million), inclusive of the planned Series 2016A&B bonds, which well exceeds the rate covenant and additional bonds test of 2.0 times, respectively.

The Series 2003A Revolving Loan Program Bonds ($35 million outstanding at FYE 2015) are unlimited obligations of the system payable from any legally available sources.

Use of Proceeds

Bond proceeds will be used for identified capital improvements around the system, anticipated refunding (depending on market conditions) of portions of the Series 2008A, 2009A and 2011A bonds; and for costs of issuance.

Obligor Profile

The University System of Maryland (established in 1988) comprises 11 of the 13 four-year degree-granting public higher education institutions in Maryland, illustrating the economic importance of its educational and research activity. There is significant research activity at the College Park and Baltimore campuses. The University of Maryland at Baltimore campus is home to the School of Medicine, which is one of the oldest schools of medicine in the nation. In FY 2015, the system generated $4.7 billion in operating revenue and enrolled a fall 2015 FTE of 125,755 students.

Methodology

The principal methodology used in these ratings was Global Higher Education published in November 2015. 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
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

Kimberly Tuby
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 assigns Aa1 to University System of Maryland's Series 2016A&B bonds; outlook stable
No Related Data.
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