Fitch Rates Baylor University's Series 2012 Bonds 'AA-'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an 'AA-' rating to $120 million revenue bonds, series 2012, issued by the Waco Education Finance Corporation on behalf of Baylor University.

The bonds are expected to sell via negotiation on or about the week of Jan. 30, 2012. Proceeds of the bonds will be utilized for various capital improvement projects.

In addition, Fitch affirms the ratings on the following bonds issued on behalf of Baylor University:

--$102.98 million Clifton Higher Education Finance Corporation fixed rate bonds at 'AA-';

--$112.1 million Waco Education Finance Corporation fixed rate revenue bonds at 'AA-';

--$73.875 million Waco Education Finance Corporation variable rate demand revenue bonds at 'AA-'; and

--$50 million taxable commercial paper (CP) program at 'F1+'.

The Rating Outlook is Stable.

SECURITY

The bonds and CP program are unsecured, general obligations of the university.

KEY RATING DRIVERS

STABLE CREDIT CHARACTERISTICS: Baylor's financial performance provides sufficient coverage of the university's moderate pro forma debt burden despite recent narrowing and heavy reliance on student-generated revenues. Balance sheet resources continue to provide an adequate additional financial cushion.

DEMAND SUPPORTS ENROLLMENT GOALS: Healthy programmatic demand, marked by increasing selectivity and student quality, should allow the university to achieve its moderate growth goals in the near term.

SIGNIFICANT CAPITAL PLANS: Several significant capital projects are expected to commence in the near term, which the university plans to fund with a combination of fund-raising, enrollment related revenue growth, and additional debt.

ADEQUATE LIQUIDITY SUPPORTS CP PROGRAM: The 'F1+' rating reflects Baylor's ability to meet the potential liquidity demands of its variable rate debt programs by a minimum of 1.25 times (x) from internal, highly liquid, resources.

WHAT COULD TRIGGER A RATING ACTION

HEIGHTENED PRO FORMA DEBT BURDEN: The current rating assumes Baylor will be able to manage increased pro forma debt carrying charges from available surpluses and maintain debt service coverage at or above current levels.

RESOURCE EROSION: Financial cushion pressure driven by further deterioration in operating performance and/or an increase in leverage without a corresponding rise in resources available for its repayment could trigger a downgrade.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Revenue-Supported Rating Criteria', dated June 20, 2011;

--'Criteria for Assigning Short-Term Ratings Based on Internal Liquidity', dated June 20, 2011;

--'U.S. College and University Rating Criteria', dated July 14, 2011.

Applicable Criteria and Related Research:

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=637130

Criteria for Assigning Short-Term Ratings Based on Internal Liquidity

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=637129

U.S. College and University Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=640830

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