Fitch Affirms University of Tampa (FL) Revs at 'BBB+'; Outlook Stable

NEW YORK--()--Fitch Ratings has affirmed the 'BBB+' rating on the following bonds issued on behalf of the University of Tampa (UT):

--$76.7 million City of Tampa, Florida Revenue and Refunding Bonds (The University of Tampa Project), series 2015;

--$69.5 million Higher Educational Facilities Financing Authority Revenue and Refunding Bonds (The University of Tampa Project), series 2012A.

The Rating Outlook is Stable

SECURITY

The bonds are payable from all unrestricted gross revenues of UT.

KEY RATING DRIVERS

STRONG OPERATING PROFILE: UT is a private not-for-profit comprehensive university serving approximately 8,000 students on its campus adjacent to downtown Tampa, FL. The 'BBB+' rating reflects UT's track record of strong operating margins supported by good student demand. UT's strong operating profile offsets its weaker balance sheet resources and very high tuition dependence.

POSITIVE MARGINS: UT's consistent generation of positive operating margins averaging 13.4% over the past five years is a primary credit strength, providing good financial flexibility and strong debt service coverage. Consistently positive margins reflect healthy student demand, conservative budgeting practices and strong internal controls.

MODEST LIQUIDITY; ONGOING CAPITAL NEEDS: UT's financial cushion is adequate but somewhat weak relative to peers, with available funds equal to 64.4% of expenditures and 54.7% of debt. Fitch expects continuing enrollment growth and internally funded capital expenditures to constrain increases in UT's financial resources. However, UT's significant flexibility from operations currently mitigates its modest liquidity.

MANAGEABLE DEBT BURDEN: UT's debt burden is moderately high, with maximum annual debt service (MADS) consuming 7.5% of fiscal 2015 operating revenues. Fitch considers UT's debt burden manageable in light of strong MADS coverage over 3x and a lack of additional long-term debt plans. UT's debt burden and leverage should moderate over time; the university plans to fund capital expenditures from gifts and operating surpluses.

RATING SENSITIVITIES

FINANCIAL CUSHION: The University of Tampa's (UT) somewhat weak balance sheet relative to peers constrains the rating. Sustained growth in available funds relative to operating expenses and debt could lead to positive rating action.

CREDIT PROFILE

Founded in 1931 by the Chamber of Commerce of Tampa, Florida, UT is a private, four-year liberal arts university located on 102 acres in downtown Tampa. The university's regional accreditation was most recently reaffirmed by the Southern Association of Colleges and Schools for a 10-year term in 2015.

CONSISTENTLY STRONG OPERATING PERFORMANCE

The 'BBB+' rating reflects UT's ability to generate consistently strong operating margins, which have averaged 13.4% over the past five fiscal years. Favorable operating performance is the result of continued enrollment growth and prudent financial practices including conservative budgeting and strong internal controls. UT's operations consistently produce strong coverage of debt service, provide the university with significant budgetary flexibility and fund capital investment while limiting debt needs. Fitch expects UT's strong margins to continue.

HEALTHY DEMAND AND ENROLLMENT SUPPORT OPERATIONS

Favorable enrollment trends continue to support the university's strong operating margins. Effective management of enrollment is crucial to the bottom line, as student charges make up a very high 97% of unrestricted operating revenues. Headcount has increased by 18.1% since fall 2011 to 7,959 in fall 2015 due to sound student demand and retention. UT's demand profile benefits from its improved academic recognition, favorable location, attractive campus and affordability relative to peers. In addition, its student base is geographically diverse (approximately two thirds out-of-state or international).

MODEST LIQUIDITY OFFSET BY STRONG MARGINS

The university's balance sheet resources are adequate but remain weaker than similarly rated peers. Available funds (cash and investments less permanently restricted net assets and unspent bond proceeds) totaled $100.6 million as of May 31, 2015. Available funds equaled 64.3% of unrestricted operating expenses ($156.6 million) and 54.7% of long-term debt ($184 million, including capital and non-cancellable operating leases).

Available funds improved as expected in fiscal 2015 due to continued strong operations and use of some 2015 debt proceeds to reimburse the university for project costs. Internal funding for ongoing capital needs will likely limit increases in UT's financial resources over the near term. Fitch believes UT's ample operating flexibility and strong debt service coverage mitigate its weaker balance sheet at this time.

MODERATELY HIGH BUT MANAGEABLE DEBT BURDEN

The university's debt burden is moderately high, with MADS consuming 7.5% of fiscal 2015 operating revenues. In addition, the series 2012C direct purchase (not rated by Fitch) matures in 2032 but includes a put in 2022. Debt service due in that year could total $24.7 million, which would equal a higher 13.3% of fiscal 2015 operating revenues.

However, Fitch gains comfort from UT's consistently strong debt service coverage. MADS coverage from fiscal 2015 operations was very strong at 3.7x, and fiscal 2015 operations would still cover maximum potential 2022 debt service by over 2x. UT's debt is approximately 90% fixed-rate, and its debt burden should continue to moderate over time due to revenue growth and the lack of additional long-term debt plans.

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

Applicable Criteria

Revenue-Supported Rating Criteria (pub. 16 Jun 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012

U.S. College and University Rating Criteria (pub. 12 May 2014)

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

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1000821

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1000821

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Tipper Austin
Associate Director
+1-212-908-9199
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Joanne Ferrigan
Senior Director
+1-212-908-0723
or
Committee Chairperson
Emily Wong
Senior Director
+1-415-732-5620
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Tipper Austin
Associate Director
+1-212-908-9199
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Joanne Ferrigan
Senior Director
+1-212-908-0723
or
Committee Chairperson
Emily Wong
Senior Director
+1-415-732-5620
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com