Fitch Rates the Univ. of Texas System's Series 2012B Revenue Financing System Refunding Bonds 'AAA'

NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an 'AAA' rating to $235 million revenue financing system (RFS) refunding bonds, series 2012B, issued by the University of Texas System Board of Regents (UT, or the system).

The series 2012B bonds (the bonds) are expected to sell via negotiation the week of Feb. 20, 2012. Proceeds of the bonds will be utilized to refinance tax-exempt ($95.5 million) RFS CP notes, refund certain outstanding RFS bonds and fund various capital improvement projects system-wide. Following the issuance of the bonds, approximately $294 million and $40.7 million of RFS tax-exempt and taxable CP notes, respectively will remain outstanding.

In addition, Fitch affirms the following ratings:

--$4,367.7 million fixed rate RFS bonds at 'AAA';

--$981.8 million variable rate RFS bonds at 'AAA/F1+'; and

--$1.25 billion authorized tax-exempt and taxable commercial paper (CP) program at 'F1+'.

The Rating Outlook is Stable.

SECURITY

RFS debt is secured by a lien on and pledge of all legally available revenues, funds and balances of the system's 15 member institutions.

KEY RATING DRIVERS

STABLE CREDIT CHARACTERISTICS: The 'AAA' rating continues to reflect UT's substantial resource base; consistently strong operating results, fueled by diverse revenues and healthy demand for programs system-wide; low debt burden; and highly experienced management team.

MANAGEABLE CAPITAL PLANS: Strong financial performance, a low pro-forma debt burden and a beneficial interest in the permanent university fund (revenue bonds rated 'AAA' by Fitch) enable UT to manage a rolling $6.3 billion, six year capital improvement plan (CIP); approximately $296 million of additional RFS obligations are expected to be incurred in support of the CIP.

CERTAIN OPERATING PRESSURES EASE: UTMB posted its second consecutive positive operating margin in fiscal 2011, following several years of Hurricane Ike related losses, and recent negative trends in state appropriations may be reversing as the economic environment within the state of Texas (the state, GO bonds rated 'AAA' by Fitch) begins to improve.

ADEQUATE LIQUIDITY AVAILABLE: The 'F1+' rating reflects the system'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.

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' (June 20, 2011);

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

--'U.S. College and University Rating Criteria' (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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