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TMCNet:  Fitch Affirms University of Chicago's (IL) Short-Term Rating at 'F1+'

[December 20, 2012]

Fitch Affirms University of Chicago's (IL) Short-Term Rating at 'F1+'

NEW YORK --(Business Wire)--

Fitch Ratings affirms its 'F1+' rating on approximately $278.4 million of outstanding adjustable-rate revenue bonds issued in differing amounts by the Illinois Finance Authority (IFA) and the Illinois Educational Finance Authority (IEFA), both on behalf of the University of Chicago (UC, or the university). In addition, the university has approximately $111.9 million of outstanding series 2008 adjustable-rate revenue bonds that are separately supported by a standby bond purchase agreement (SBPA) provided by US Bank, N.A. (rated 'AA-/F1+' with a Stable Rating Outlook by Fitch).

SECURITY

Revenue bonds are an unsecured, general obligation of UC, payable from all legally available funds.

KEY RATING DRIVERS

FINANCIAL STRENGTH OF UC: The university's credit strengths include a premier academic reputation; substantial balance sheet resources; generally positive operations, supported by consistently strong student demand and a diverse revenue base; and manageable financial leverage. Fitch rates the university's revenue bonds 'AA+'.

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

CREDIT PROFILE

Internal Liquidity Supports Short-Term Debt Obligations

The 'F1+' rating is based on the availability of highly liquid, highly rated securities to cover potential maximum liquidity demands presented by UC's outstanding adjustable-rate revenue bonds and commercial paper (CP) notes (not rated by Fitch). To supplement internal liquidity sources, UC maintains the ability to draw on dedicated lines of credit in the aggregate amount of $300 million. Of the university's substantial cash and investments, approximately $1.06 billion including cash and cash equivalents, U.S. government and agencies securities, and investment grade corporate bonds (after Fitch discounts base on asset type and maturity) was available on Sept. 30, 2012.

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On a combined basis, UC's liquid assets totaled $1.36 billion and covered its variable rate obligations of $788.5 million by a healthy 1.73x. For an 'F1+' rating, Fitch typically expects coverage of at least 1.25x. Fitch included outstanding variable rate bonds in the amount of $468.5 million, UC's maximum CP authorization of $200 million ($100 million currently outstanding), and outstanding line of credit borrowings ($120 million) to determine the aggregate liability. Fitch excluded the IFA series 2008 bonds currently outstanding in the amount of $111.9 million that are separately supported by a SBPA.

Founded in 1890, UC is a private comprehensive university located in Hyde Park, eight miles south of downtown Chicago. Its prestigious reputation is the basis of its highly selective demand characteristics at both the undergraduate and graduate levels. UC's fall 2012 undergraduate acceptance rate was an impressive 13.2% with nearly 46% of accepted students enrolling and forming the largest incoming freshmen class (1,527) in five years. UC's total headcount for fall 2012 remained stable at 15,246.

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

--'Criteria for Assigning Short-Term Ratings Based on Internal Liquidity' (June 15, 2012);

--'Fitch Confirms University of Chicago's (IL) Revs at 'AA+/F1+'; Outlook Stable' (April 20, 2012);

--'The University of Chicago, Illinois' (Jan. 12, 2012).

Applicable Criteria and Related Research:

Criteria for Assigning Short-Term Ratings Based on Internal Liquidity

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=681822

The University of Chicago, Illinois

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=665531

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.


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