|[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).
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.
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.
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
The University of Chicago, Illinois
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