Fitch Ratings has assigned an 'AA+' rating to the following university enterprise refunding revenue bonds issued by the Regents of the University of Colorado (CU):
--$71.3 million taxable series 2015C.
The bonds are expected to price via negotiation on or about Jan. 15, 2015. Bond proceeds will be used to refund outstanding series 2007A bonds for savings.
The Rating Outlook is Stable.
SECURITY
The bonds are a special limited obligation secured by and payable from a pledge of university net revenues. Pledged revenues consist primarily of auxiliary revenues, indirect cost recovery revenues, student fees, a portion (10%) of tuition revenues, and other self-funded and research related services. Pledged revenues exclude state appropriations.
KEY RATING DRIVERS
SOLID FINANCIAL PROFILE: The 'AA+' rating primarily reflects CU's solid level of balance sheet resources relative to operations and debt. A track record of breakeven to positive margins fueled by historical enrollment growth and fairly diverse revenue sources; manageable pro forma debt burden and capital plans; and significant fund-raising ability are also rating factors.
STABLE OVERALL STUDENT DEMAND: CU's prominent position as the flagship institution for higher education and research in the state of Colorado has driven steady enrollment growth over the past several years, thereby benefitting its revenue base. Continued undergraduate student enrollment growth has offset uneven graduate enrollment in recent years.
MANAGEABLE CARRYING COSTS: Operating cash flows service a moderate pro forma debt burden by a comfortable margin. Net revenues pledged to university enterprise revenue bonds generally provide solid coverage of related maximum annual debt service near 2x annually.
IMPROVING STATE SUPPORT: CU's limited reliance on the state for operating support partly mitigates concerns over its reduced level of funding since the financial crisis. Following several years of significant cuts in state funding for higher education, state appropriations increased modestly in fiscal 2014, with further increases approved in the state's enacted fiscal 2015 budget and expected in fiscal 2016.
RATING SENSITIVITIES
ENROLLMENT STABILITY: Moderating student enrollment growth, while not currently envisioned, could lead to downward rating pressure, as student-generated revenues represent CU's largest revenue source (35%).
CONTINUED BALANCE SHEET STRENGTH: Continued balance sheet strength is important to CU's overall rating stability, as potentially more variable health services revenues derived from faculty physicians and investment gains are growing contributors to net income.
CREDIT PROFILE
Please see Fitch's University of Colorado rating action commentary and new issue report dated January 9, 2015 and January 12, 2015, respectively, available at www.fitchratings.com for additional information.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'University of Colorado' (January 2015);
--'Fitch Rates University of Colorado's Series 2015A&B Rfdg Revs 'AA+'; Outlook Stable' (January 2015);
--'U.S. College and University Rating Criteria' (May 2014);
--'Fitch Upgrades Univ of Colorado Health Auth & Poudre Valley Health Care (CO) Revs to 'AA-'; Outlook Stable' (March 2014).
Applicable Criteria and Related Research:
University of Colorado
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=844168
U.S. College and University Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748013
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=969575
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