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Rating Action:

Moody's assigns Aa3 to Texas Woman's University $12.4M Series 2014 bonds; outlook stable

Global Credit Research - 28 Mar 2014

$76.8M rated debt

New York, March 28, 2014 --

Moody's Rating

Issue: Revenue Financing System Refunding Bonds, Series 2014; Rating: Aa3; Sale Amount: $12,395,000; Expected Sale Date: 4/15/2014; Rating Description: Revenue: Public University Broad Pledge

Opinion

Moody's Investors Service has assigned a Aa3 rating to Texas Woman's University's (TWU) $12.4 million of fixed rate Revenue Financing System Refunding Bonds, Series 2014. At this time, we have affirmed the Aa3 ratings on the university's outstanding rated debt. The outlook is stable.

SUMMARY RATING RATIONALE

The Aa3 rating and stable outlook reflects the university's solid market position as the only Texas public higher education institution serving a primarily female student body, positive operating performance in spite of reductions to state appropriations, and manageable debt burden that is currently well supported by financial resources. The rating also incorporates the university's significant capital needs to support a growing student population, pressured operating performance in recent years, and very modest fundraising.

STRENGTHS

*TWU has a solid market niche as the only public higher education institution in Texas with a primarily female student body, which is further strengthened by high demand programs in nursing and health sciences.

*Financial resource growth through retained surpluses has been strong. Expendable financial resources increased 43% since FY 2009 to $156.0 million in FY 2013, providing a cushion to debt of 2.0 times.

*Undergraduate student demand continues to strengthen, with first-time freshmen applications increasing 62% from fall 2009 to fall 2013, and total full-time equivalent (FTE) enrollment increasing 5% over the same time period to 12,426 FTEs in fall 2013.

*Positive operating performance has been sustained through prudent expense management despite declines in state appropriations and tuition revenue in FY 2013. Operating cash flow margin of 14.2% in FY 2013 provides healthy debt service coverage of 2.8 times.

CHALLENGES

*The university has substantial capital plans totalling $218 million over the next five to seven years, which are expected to be funded primarily through debt.

*Operating revenues have been pressured through reductions to state appropriations, and increasing veteran tuition exemptions at the state level. Fiscal 2013 operating margin of 3.4% represents the university's weakest operating performance since FY 2004.

*Historically the university's fundraising has been weak, resulting in a very weak average gifts per student of $139 in FY 2013 compared to the FY 2012 public university Aa3 median of $1,038 average gifts per student.

OUTLOOK

The stable outlook is predicated on the expectation that Texas Woman's University will continue to experience solid student demand trends for its undergraduate programs and stabilize graduate student demand, and will continue to generate healthy operating performance with the state providing good operating and debt service support.

WHAT COULD MAKE THE RATING GO UP

This is unlikely given the smaller magnitude of the university's operating and financial resources relative to Aa2 rated peers. Significant growth in financial resources absent any increases in debt, coupled with revenue growth driven by enrollment increases could positively pressure the rating.

WHAT COULD MAKE THE RATING GO DOWN

The university would face negative rating pressure if its leverage position increased through significant borrowing absent commensurate growth in flexible reserves. The rating would also be negatively pressured by further erosion of operating revenue, and a meaningful decline in cash flow.

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.

Caitlin Bertha
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

Eva Horton Bogaty
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 assigns Aa3 to Texas Woman's University $12.4M Series 2014 bonds; outlook stable
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