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TEXT-Fitch rates Methodist University, N.C. revs 'BBB'
July 16, 2012 / 8:34 PM / 5 years ago

TEXT-Fitch rates Methodist University, N.C. revs 'BBB'

July 16 - Fitch Ratings has assigned a 'BBB' rating to $17.5 million North
Carolina Capital Facilities Finance Agency revenue bonds, series 2012 issued on
behalf of Methodist University (MU, or the University).

The series 2012 bonds are expected to be sold via negotiation on or about the
week of Aug. 13th. The proceeds of the bonds will be used to refinance various
bank loans including those utilized for a student housing project and several
building renovations, fund a debt service reserve (DSR) and pay costs of
issuance.

SECURITY

The bonds are a general obligation of the university. Further securing the bonds
is a fully funded DSR Fund and a mortgage on the core campus, buildings and land
offered on a pro rata basis to all creditors.

KEY RATING DRIVERS

STABLE OPERATING CHARACTERISTICS: MU's 'BBB' rating reflects historically stable
operating performance, growing enrollment and adequate coverage of pro forma
debt service obligations counterbalanced by relatively high exposure to
variable-rate debt, a moderately high pro forma debt burden, limited revenue
diversity and just adequate balance sheet resources.

CONSIDERABLE VARIABLE-RATE DEBT: Post issuance, floating-rate debt as a percent
of the total portfolio decreases from 100% to 55%; however, 29% of the variable
debt will remain unhedged. The rating level denotes MU's limited ability to
manage the potential risks presented by its variable-rate exposure.

REVENUE CONCENTRATION: Typical of many private higher education institutions,
the university's dependency on student generated revenues is high, exposing MU
to unexpected shifts in demand.

LIMITED FINANCIAL CUSHION: The university's balance sheet resources provide a
relatively thin cushion for its operating expenditures.

MODERATELY HIGH DEBT BURDEN: Maximum annual debt service of about $2.98 million
consumes a measurable 6.5% of fiscal 2011 unrestricted operating revenues,
tempered, however, by a lack of any additional near-term debt plans.

WHAT COULD TRIGGER A RATING ACTION

ADDITIONAL DEBT ISSUANCE: While not expected over the near term, MU's incurrence
of any new debt without a commensurate increase in resources could pressure the
rating.


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:
'Revenue-Supported Rating Criteria', June 12, 2012;
'U.S. University and University Rating Criteria', May 24, 2012.

Applicable Criteria and Related Research:
Revenue-Supported Rating Criteria
U.S. College and University Rating Criteria

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