|[April 29, 2013]
Fitch Affirms Mississippi State University's (MS) Short-Term Rating at 'F1+'
NEW YORK --(Business Wire)--
Fitch Ratings has affirmed the 'F1+' rating on the Mississippi State
University Educational Building Corporation (MSUEBC or the corporation)
taxable and tax-exempt commercial paper (CP) program on behalf of
Mississippi State University (MSU). The program's maximum authorized
limit is $50 million.
Draws under the program will provide short-term financing of
improvements to MSU's football stadium and other capital projects,
currently refund certain obligations of the corporation, and redeem
maturing commercial paper.
The corporation's CP is secured by designated revenues generated by the
eight academic institutions comprising the State Institutions of Higher
Learning (IHL). Designated revenues include: net tuition, fees and
auxiliary receipts, sales and services revenues, other operating
revenues, state appropriations, and unrestricted net assets.
MSU's high quality, highly liquid resources will provide the primary
liquidity support for a failed rollover of CP. However, as noted in the
indenture, IHL (rated 'AA' with a Stable Outlook by Fitch) remains
ultimately responsible for CP payment.
KEY RATING DRIVERS
CREDIT STRENGTH OF IHL: Fitch maintains an 'AA' rating with a Stable
Outlook on IHL's long-term credit, which primarily reflects a
track-record of positive operating performance, a satisfactory level of
unencumbered resources relative to operating expenses and long-term
debt, and a manageable debt burden.
SUFFICIENT LIQUID RESOURCES: The 'F1+' rating is based on IHL's ability
to cover the maximum potential liquidity requirement associated with
MSU's CP program by a minimum of 1.25x. Further comfort is provided
MSU's access to internal, highly liquid resources, which covered the
maximum authorization by a sound 2.49x (based on data from March 31,
MATERIAL DECLINE IN LIQUID INVESTMENTS: The 'F1+' rating could be
negatively impacted by a decline in available resources to a level that
resulted in less than the minimum 1.25x coverage required under Fitch's
Criteria for Assignment Short-Term Ratings Based on Self Liquidity.
Founded in 1944, the IHL represents the state's eight academic
institutions: University of Mississippi (UM), Alcorn State University,
Delta State University, Jackson State University, Mississippi State
University (MSU), Mississippi University for Women, Mississippi Valley
State University, and USM. It also includes the University of
Mississippi Medical Center, which is part of UM.
Enrollment at IHL member institutions totaled 81,022 for the fall 2012
academic term, or 0.6% over fall 2011 and 13.8% above fall 2008 levls.
As a percentage of total headcount enrollment, MSU is the second largest
institution in the system, regularly accounting for approximately
one-fourth of IHL's enrollment base. Total headcount enrollment at MSU
stood at 20,365 in fall 2012.
SUFFICIENT LIQUID RESOURCES
The 'F1+' rating is based on the availability of adequate, highly
liquid, highly rated securities to cover the maximum potential demand
obligations presented by MSU's CP program ($50 million). MSU does not
have any outstanding variable rate demand obligations or any other forms
of puttable debt. Further, no other member institution within IHL
maintains a CP program and all of IHL's outstanding bonds are in
IHL's most highly liquid financial resources (consisting of cash, U.S.
government agency obligations, and U.S. treasury obligations) totaled
approximately $705.2 million on June 30, 2012, which is well in excess
of the $50 million maximum authorization associated with MSU's CP
program($22 million outstanding as of April 1, 2013). Moreover, as of
March 31, 2013, MSU's internal liquid investments, consisting primarily
of cash and U.S. treasury and agency debt, totaled approximately $124.5
million (after discounts based on asset type and maturity per Fitch's
short-term rating criteria). These liquid assets covered the maximum
authorization by a sound 2.49x, exceeding the 1.25x coverage Fitch
expects for an 'F1+' rating.
MSU maintains a liquidation procedures plan to manage a failed roll over
or remarketing. The plan delineates the specific timing sequences,
procedures for liquidation, and authorized personnel responsible for
these steps. Fitch views favorably the presence of such a plan as it
reflects management's commitment to the timely redemption of maturing CP
Additional information is available at 'www.fitchratings.com'
Applicable Criteria and Related Research:
--'Revenue Supported Rating Criteria' (June 12, 2012);
--'Criteria for Assigning Short-Term Ratings Based on Internal
Liquidity' (June 15, 2012);
--'Fitch Rates University of Southern Mississippi Educ Bldg Corp Revs
'AA'; Outlook Stable' (April 18, 2013).
Applicable Criteria and Related Research
Revenue-Supported Rating Criteria
Criteria for Assigning Short-Term Ratings Based on Internal Liquidity
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DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
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