|[September 25, 2013]
Fitch Affirms Baylor University, TX's CP Notes at 'F1+'
CHICAGO --(Business Wire)--
Fitch Ratings has affirmed the 'F1+' rating on Baylor University, TX's
(BU) $50 million authorized taxable commercial paper (CP) notes, series
Baylor's CP program is an unsecured, general obligation of the
KEY RATING DRIVERS
SUFFICIENT LIQUID RESOURCES: The 'F1+' rating is based on Baylor
University's ability to cover the maximum potential liquidity presented
by its taxable CP program by at least 1.25x from internal resources.
FINANCIAL FLEXIBILITY: The university's positive operating performance
and existing balance sheet resources continue to provide an adequate
level of financial flexibility, particularly given the university's
strong demand profile and stable enrollment.
KEY RATING SENSITIVITIES:
SUFFICIENT LIQUID RESOURCES: Baylor currently has liquid resources to
support the 'F1+' short-term rating. However, while unexpected, should
these resources decline relative to self-liquidity debt, there will be
negative rating implications.
MAINTAIN STRONG INSTITUTIONAL CHARACTERISTICS: Baylor continues to
demonstrate solid financial characteristics consistent with its
long-term rating. Should the long-term rating fall below its current
'A+' rating, the short-term rating will be downgraded per Fitch's
The 'F1+' rating is based on the availability of highly liquid, highly
rated securities to cover the liquidity demands presented by BU's
taxable CP program. The program has a maximum authorization of $50
million, and approximately $15 million is currently outstanding. As of
Aug. 31, 2013, available liquid assets, as adjusted per Fitch's
criteria, totaled $193 million, providing 3.8x coverage of the maximum
CP authorization. Fitch views this level as healthy, and consistent with
the minimum 1.25x coverage expectation for the highest short-term rating.
Baylor does not maintain any self-liquidity exposure to variable rate
debt instruments aside from its CP program. At present, approximately
$69 million of series 2008A VRDBs have bank liquidity support.
The university's underlying credit strengths further support the
short-term rating. Pro forma fiscal 2012 debt burden was low to moderate
at 3%, and operations have narrowed but remained just above break-even
in both fiscal 2011 and 2012. University management prjects operating
results for the fiscal year ended May 31, 2013 will be positive on a
full accrual basis. Fitch considers the university's conservative,
long-term financial planning to be a positive factor. Additionally,
Baylor's enrollment and demand trends, which are integral to the
university's ability to generate stable operating revenues, remain
favorable. Headcount enrollment has grown consistently over time,
reaching 15,364 in fall 2012, and 15,616 in fall 2013.
Baylor was chartered by the Republic of Texas on Feb. 1, 1845 and is the
oldest continuously operating institution of higher learning within the
state. Management reports that it is the largest Baptist university in
the world, and offers undergraduate and graduate degrees to students at
its campus in Waco, Texas. Most students originate from within the
state, and student quality well exceeds state and national averages.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'U.S. College and University Rating Criteria' (May 2013);
--'Criteria for Assigning Short-Term Ratings Based on Internal
Liquidity' (June 2013);
--'Fitch Downgrades Baylor University (TX) Revs to 'A+'; Outlook Stable'
Applicable Criteria and Related Research:
U.S. College and University Rating Criteria
Criteria for Assigning Short-Term Ratings Based on Internal Liquidity
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