|[October 17, 2013]
Fitch Affirms Vanderbilt University, TN's Short-Term Rating at 'F1+'
NEW YORK --(Business Wire)--
Fitch Ratings has affirmed its 'F1+' rating on Vanderbilt University,
TN's (Vanderbilt) $675 million taxable and tax-exempt commercial paper
The CP notes are an unsecured general obligation of Vanderbilt, payable
from all legally available funds.
KEY RATING DRIVERS
UNIVERSITY FINANCIAL STRENGTH: Vanderbilt's strong financial profile is
evidenced by generally positive operations, substantial balance sheet
resources, and manageable debt burden; coupled with strong reputational
and student demand characteristics. Fitch maintains an 'AA+' rating on
Vanderbilt's outstanding revenue bonds.
RESOURCE SUFFICIENCY: The short-term 'F1+' rating is based on
Vanderbilt's ability to cover the maximum potential liquidity demands
presented by its variable rate debt programs by at least 1.25 times (x)
from internal resources. Such resources include cash; highly liquid,
highly rated investments; and internal liquidity facilities.
RESOURCE EROSION: Deterioration of internal liquid resources to the
point where the university could no longer cover its variable-rate
obligations by at least 1.25x, while considered unlikely, would put
downward pressure on the short-term rating.
Vanderbilt is a private comprehensive university and medical center
located in Nashville, TN. The university consists of 10 schools and
colleges, and the medical center consists of the School of Medicine, the
School of Nursing, the Vanderbilt Medical Group and the Vanderbilt
University Hospitals and Clinics. Based on preliminary data, the
university's fall 2013 freshman acceptance rate was an impressive 12.7%,
with a solid 40.7% of accepted students choosing to enroll. Fall 2013
full-time equivalent enrollment of 12,229 represents a 5.6% increase
since fall 2008. Vanderbilt's revenue base remains concentrated in
healthcare operations, which account for about two-thirds of total
unrestricted operating revenues. Its next largest funding sources are
grants and contracts and student fee revenue.
The 'F1+' rating is based on the availability of highly liquid, highly
rated securities to cover potential maximum liquidity demands presented
by Vanderbilt's taxable and tax-exempt CP program. To supplement
internal liquidity sources, the university maintains te ability to draw
on dedicated hybrid lines of credit in the aggregate amount of $400
million. Of Vanderbilt's substantial cash and investments, approximately
$832.6 million, including cash, cash equivalents and U.S. government
securities (after discounts based on asset type and maturity per Fitch's
short-term rating criteria) was available on a same- or next-day basis
as of Sept. 30, 2013.
On a combined basis, Vanderbilt's liquid assets totaled $1.23 billion
and covered its total CP authorization of $675 million ($214.2 million
currently outstanding) by a solid 1.83x. Fitch typically expects
coverage of at least 1.25x for an 'F1+' rating. To minimize potential
daily calls on its liquidity, the university limits the amount of CP
notes that can come due on a given day to $50 million. Vanderbilt's
management team has a regularly updated set of liquidation procedures in
place detailing the process by which a need for internal liquidity would
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Criteria for Assigning Short-Term Ratings Based on Internal
Liquidity' (June 13, 2013);
--'The Vanderbilt University, Tennessee' (Nov. 13, 2012).
Applicable Criteria and Related Research:
Criteria for Assigning Short-Term Ratings Based on Internal Liquidity
The Vanderbilt University, Tennessee
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