Fitch Affirms University of Central Florida's Health Center Revs at 'AA-'; Outlook Stable

NEW YORK--()--Fitch Ratings has affirmed the 'AA-' rating on approximately $4.4 million of student health center revenue bonds issued by the State of Florida, Florida Education System. The bonds are issued on behalf of the University of Central Florida (UCF).

The Rating Outlook is Stable.

SECURITY

The bonds are secured by a first lien on gross revenues from a mandatory student health fee assessed per credit hour on all students and associated interest earnings.

KEY RATING DRIVERS

MANDATORY FEE PLEDGE: The 'AA-' rating primarily reflects the strong gross pledge and universal nature of a health center fee assessed on UCF's large student population. This fee, which generates over 75% of the health center's revenues, provides consistently strong coverage of debt service.

STRONG ENROLLMENT BASE: UCF's large and stable enrollment base ensures demand for health services and supports the system's ability to service debt and maintain sound financial performance.

UCF'S CREDIT STRENGTH: Although the university's resources are not pledged, the health center bonds benefit from UCF's strong demand and enrollment, generally positive operating performance, diverse revenue streams, healthy balance sheet, and moderate debt burden.

RATING SENSITIVITIES

UCF OPERATIONS: While not expected, a deterioration of the University of Central Florida's credit profile or enrollment base could negatively pressure the rating.

CREDIT PROFILE

UCF was founded in 1963 and is one of the 12 universities in the State University System of Florida. The university serves over 63,000 students on its main campus, hospitality campus, and health sciences campus in Orlando, FL and its 10 regional locations.

STRONG DEBT SERVICE COVERAGE

The mandatory student health fee assessed on all students per credit hour is the largest source of pledged revenue. The fee generated $16.6 million in fiscal 2015, up from $11.8 million in fiscal 2011 due to enrollment growth and small fee increases over that period. Currently $10.84 per credit hour, the fee will likely remain flat.

Fiscal 2015 pledged revenues covered maximum annual debt service (MADS) of $620,780 by a very strong 26.8 times (x) on a legal (gross revenue) basis. Over the past five years, legal coverage of health center MADS has improved from 19x in fiscal 2011. Fitch-calculated economic coverage, conservatively based on net system revenues available for debt service despite the gross pledge, is also strong at 9.9x MADS. The health system generates good cash flow to fund capital improvements and has no additional debt plans at this time.

UNIVERSITY OF CENTRAL FLORIDA

The university's credit profile is characterized by a very large enrollment base, with over 63,000 students and solid demand. UCF continued its general trend of positive GAAP-based operating results in fiscal 2015 reflecting enrollment growth and improving state support. The university is well-positioned for continued growth in state appropriations based on its top scores under Florida's performance funding framework. Balance sheet resources are healthy, with available funds (cash and investment less certain restricted net assets) equal to 46.6% of operating expenses and 77.8% of debt (including debt of component units and closely affiliated entities). In addition, UCF maintains a low debt burden, with MADS consuming only 2.2% of fiscal 2015 operating revenue. Including all component unit and affiliated organization debt, UCF's debt burden remains moderate at 4.4%, with strong coverage from operations typically above 2x.

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

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https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1005429

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

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Contacts

Fitch Ratings, Inc.
Primary Analyst
Tipper Austin, +1-212-908-0723
Associate Director
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Joanne Ferrigan, +1-212-908-0723
Senior Director
or
Committee Chairperson
James Lebuhn, +1-312-368-2059
Senior Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings, Inc.
Primary Analyst
Tipper Austin, +1-212-908-0723
Associate Director
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Joanne Ferrigan, +1-212-908-0723
Senior Director
or
Committee Chairperson
James Lebuhn, +1-312-368-2059
Senior Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com