Fitch Affirms Johns Hopkins University's (Maryland) Short-Term Rating at 'F1+'

NEW YORK--()--Fitch Ratings has affirmed its 'F1+' rating on the following debt issued by the Maryland Health and Higher Educational Facilities Authority (MHHEFA) on behalf of Johns Hopkins University (JHU, or the university):

--$69.3 million variable-rate revenue bonds, series 2005A;

--$400 million taxable and tax-exempt commercial paper (CP) program.

SECURITY

Revenue bonds and CP are unsecured general obligations of JHU.

KEY RATING DRIVERS

FINANCIAL STRENGTH OF JHU: The university maintains a strong financial profile, demonstrated by consistently positive operations; substantial balance sheet resources; robust fundraising; and manageable debt burden. Fitch maintains a long-term 'AA+' rating on JHU's outstanding MHHEFA revenue bonds.

RESOURCE SUFFICIENCY: The 'F1+' rating is based on JHU's ability to cover the maximum potential liquidity demands presented by its variable rate debt programs by at least 1.25x from internal resources. Such resources include cash; highly liquid, highly rated investments; and dedicated liquidity facilities.

RATING SENSITIVITIES

FINANCIAL DETERIORATION: Erosion to JHU's internal resource base to the point where the university could no longer cover its variable-rate obligations by at least 1.25x, while unlikely, would put downward pressure on the short-term rating.

CREDIT PROFILE

Founded in 1867 and based in Baltimore, MD, JHU is a comprehensive private university that is internationally recognized for excellence in research. The university had a headcount of 21,327 students enrolled in its various undergraduate, graduate and professional divisions in fall 2013, with full-time equivalent enrollment of 16,216. Student quality indicators and various demand statistics remain strong, as evidenced by a fall 2013 average freshmen SAT score exceeding 1400 and an acceptance rate of just 17%.

JHU's strong financial profile is characterized by consistently positive operations; substantial balance sheet resources; strong fundraising ability, including its current $4.5 billion campaign; and a manageable debt burden. These strengths are tempered by the university's revenue concentration in federal research funding, which makes up more than half of total unrestricted operating revenues. JHU also benefits from the strong competitive and financial position of the Johns Hopkins Health System (revenue bonds rated 'AA-' by Fitch), an independently governed and incorporated health system that includes Johns Hopkins Hospital, the primary teaching facility for JHU's School of Medicine.

LIQUID RESOURCES SUPPORT SHORT-TERM DEBT

The 'F1+' rating is based on the availability of highly liquid, highly rated securities to cover potential maximum liquidity demands presented by JHU's outstanding variable-rate revenue bonds and CP notes. To supplement internal liquidity sources, JHU maintains the ability to draw on three dedicated lines of credit in the aggregate amount of $375 million. Of the university's substantial cash and investments, approximately $1.57 billion, including cash, U.S. government and agencies securities and investment grade corporate debt (after discounts based on maturity per Fitch's short-term rating criteria) was available on March 31, 2014.

On a combined basis, JHU's liquid assets totaled $1.95 billion and covered its liquidity needs of $469.3 million by a healthy 4.15x. This includes $69.3 million of outstanding variable-rate revenue bonds and its maximum CP authorization of $400 million ($263 million outstanding as of April 30, 2014). For an 'F1+' rating, Fitch typically expects coverage of at least 1.25x. To limit potential demands on its liquidity, JHU limits the amount of CP notes that can come due on a given day to $50 million. The university's detailed procedures for handling a failed remarketing of variable-rate bonds and/or rollover of CP are regularly reviewed, reflecting favorably on management.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'U.S. College and University Rating Criteria' (May 12, 2014);

--'Rating U.S. Public Finance Short-Term Debt' (Dec. 9, 2013);

--'Fitch Rates Johns Hopkins University's (MD) Revenue Bonds 'AA+'; Outlook Stable' (May 29, 2013).

Applicable Criteria and Related Research:

U.S. College and University Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748013

Rating U.S. Public Finance Short-Term Debt

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724680

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=830542

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Contacts

Fitch Ratings
Primary Analyst
Colin Walsh, +1 212-908-0767
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Joanne Ferrigan, +1 212-908-0723
Senior Director
or
Committee Chairperson
Charles Giordano, +1 212-908-0607
Senior Director
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Colin Walsh, +1 212-908-0767
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Joanne Ferrigan, +1 212-908-0723
Senior Director
or
Committee Chairperson
Charles Giordano, +1 212-908-0607
Senior Director
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com