NEW YORK, Jun 21, 2012 (BUSINESS WIRE) —
Fitch Ratings has affirmed the ‘A+’ rating on approximately $112 million
of dormitory revenue bonds issued by the Florida Board of Education and
State of Florida Board of Governors (the board). The bonds are issued on
behalf of the University of Central Florida (UCF).
The Rating Outlook is Stable.
The bonds are secured by a net revenue pledge of UCF’s housing system
KEY RATING DRIVERS
STABLE CREDIT CHARACTERISTICS: The ‘A+’ rating reflects the system’s
history of positive, strengthening operating performance, fueled by
enrollment growth and related, strong demand for housing.
Counterbalancing factors include a high debt burden and limited
ACCEPTABLE DEBT SERVICE COVERAGE: The system’s consistent ability to
cover housing revenue bond debt service from operations, on average, by
1.5 times (x) over the past five years partially mitigates the
UCF’s FINANCIAL PROFILE: System operations are bolstered by UCF’s
strengths, notably its historically positive margin. fueled by healthy
student demand and enrollment. UCF also has a sound financial cushion.
Management has been successful in achieving these outcomes despite a
weakening appropriation environment.
UCF’s housing system remains strong, producing an operating margin of
approximately 20% (unaudited) in fiscal 2011. up from 17% the prior
year. For the nine-month period ended March 31, 2012, the system
generated approximately $1 million more in operating income compared to
the previous year, indicating improved operating results. Strength in
system operating performance is largely attributable to very strong
student housing demand. Despite increases in housing stock over the past
five years fall semester occupancy rates consistently exceed 99%.
Occupancy for fall 2011 was 99%, with UCF returning nearly 550
unprocessed housing applications due to lack of available beds.
Not atypical for a standalone university auxiliary, the system’s
financial cushion is fairly limited. Additionally, its pro forma debt
burden is high. In fiscal 2011, available funds, defined as cash and
investments not permanently restricted, totaled $6.7 million. This
equaled an adequate 35% of operating expenses, but just 6% of pro forma
debt. Fitch recognizes the system’s ability to amass significant
reserves will be constrained by the capital intensive nature of its
The system issued debt in the amount of $67 million earlier in 2012, $23
million of which was used to refund a portion of outstanding system
bonds, bringing total debt outstanding to approximately $112 million.
The system’s debt burden is high at 27% based on maximum annual debt
service (MADS) of $8.8 million occurring in fiscal 2017. Adequate debt
service coverage, driven largely by the track record of positive
operating performance, partially offsets concern over a debt burden of
this magnitude. Based on projections for fiscal 2012, annual debt
service (ADS) coverage is 1.67x. MADS coverage is calculated to be
1.21x. Management projections of revenues, expenditures, and occupancy,
based on demonstrated operating history, are reasonable in Fitch’s
opinion. Over the near term, the system has no additional debt plans.
UCF is one of the largest universities in the United States, enrolling
approximately 58,698 students across 12 campuses during fall 2011. UCF’s
main campus is located 13 miles northeast of downtown Orlando, FL. UCF
consistently generates a positive operating margin. The fiscal 2011
margin was 7.2%, comparable to the five-year average of 7.4%. Robust
growth in student generated revenues has been driven by increasing
enrollment and moderate but regular tuition and fee increases. This in
turn has helped to offset recent declines in appropriations from the
state of Florida (state GOs rated ‘AAA’ with a Negative Outlook by
Given UCF’s affordability, Fitch believes student demand will not be
impacted by proposed, and potentially significant, increases in tuition
over the next few years to offset continued weakness in state funding.
Moreover, unencumbered resources, which have grown over the past five
years as a result of the positive operating performance, will also
provide a buffer. For fiscal 2011 UCF’s available funds totaled $359
million representing a solid 47% and 65% of operating expenditures and
pro-forma debt, respectively.
Additional information is available at ‘
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 12, 2012);
–‘U.S. College and University Rating Criteria’ (May 24, 2012);
–‘Fitch Rates University of Central Florida’s Ser 2012A Dormitory
Revenue Bonds ‘A+’, Outlook Stable’ (Jan. 12, 2012).
Applicable Criteria and Related Research:
Revenue-Supported Rating Criteria
U.S. College and University Rating Criteria
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DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
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SOURCE: Fitch Ratings
Elizabeth Fogerty, +1-212-908-0526
Media Relations, New York
James George, +1-212-908-0652
One State Street Plaza
New York, NY 10004
Joanne Ferrigan, +1-212-908-0723
Maura McGuigan, +1-212-908-0591
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