MOODY'S ASSIGNS Aa RATING TO UNIVERSITY OF NEBRASKA; Dominant Market Postion in the State and Solid Financial Resources Cited

Business Wire, July 19, 1996

NEW YORK--(BUSINESS WIRE)--July 19, 1996--Moody's has assigned an Aa rating to the University of Nebraska's sale of $2.1 million Series 1996 bonds issued through the University of Nebraska Facilities Corporation (UNFC).

At this time, Moody's has also upgraded the University of Nebraska Parking Revenue Bonds at the Lincoln campus to an A1, from an A. This upgrade affects the current $9.1 million sale of Series 1996 Parking Revenue Bonds and $2.3 million in outstanding Parking Revenue Bonds. Moody's is confirming the A1 ratings on the University's Student Fees and Facilities Revenue Bonds for the Kearney and Lincoln Campuses and the Omaha Student Center and Fees Revenue Bonds.

Although the University's general credit characteristics would have previously placed it in the Aa rating category, the nature of the security for previously outstanding bonds limited the University s highest bond rating to an A1. The current UNFC issue is backed both by a general obligation of the University's affiliated, but legally separate foundation, and a pledge of all legally available University funds. The strong security provided by the University's pledge leads to the Aa rating assigned to the Series 1996 UNFC bonds. Moody's recent rating actions are based on the following credit factors:

University is a State-Wide System with a Dominant Market Position

The University's three four-year campuses enroll approximately 80% of all students attending public four-year colleges in the state. In addition, the University operates a medical center in Omaha. Enrollment over the past several years has been relatively stable but is anticipated to grow modestly due to the increasing number of high-school students in Nebraska. Around 90% of the University's enrollment is comprised of Nebraska residents, so enrollment closely follows the state s demographic trends. Demand for the University's programs is strong at all campuses, as indicated by matriculation rates above 50%.

Endowment Is Sizable and Operations Are Solid

The University's endowment, the majority of which is held by an affiliated Foundation, exceeds $400 million. Only a small portion of this endowment, however, is spendable quasi-endowment. Other available funds provide strong security for debt, covering currently outstanding debt by over two times, and a good financial cushion for the University's budget. Annual financial results have yielded increasing surpluses in part due to the hospital's improved operating performance.

Debt Levels Moderate But Significant Additional Borrowing Anticipated

While debt levels are currently relatively low, the University's six-year capital plan calls for significant borrowing, potentially up to $160 million, for housing, parking, hospital, and other auxiliary needs. Additional borrowing may be undertaken for deferred maintenance, but the size, timing, and structure of such borrowing has not been determined. These estimated future debt levels should be manageable given the University's historically conservative fiscal practices and solid financial reserves.

UNFC Series 1996 Bonds Well-Secured by Foundation and University Funds

These bonds are being issued to renovate and expand the University's College of Dentistry. The Foundation has sufficient available income and assets to cover repayment. It is also expecting to receive gifts during the University's capital campaign that could be used for debt service. Pledged University funds provide additional strong security.

Parking Revenue Bonds Upgraded Due To New Covenant, Strong Coverage and Demand

With this issue, the Board covenants to use available funds to pay parking system expenses to maintain 1.1 times coverage of debt service requirements. Debt service coverage has been strong in recent years, and the Board controls parking fees. Demand for the parking facilities will continue to exceed supply even after construction of the new garage from the proceeds of the current issue.

Pledged Revenues for Auxiliary Related Bonds Currently Campus Specific

Although the University is a single legal entity and the Board may reallocate funds among campuses, the security of outstanding auxiliary related bonds is weakened by the historical pledge of only campus- specific student fee and auxiliary revenues. Under a new indenture, adopted by the Board of Regents in 1995 that will be slowly phased in, this pledge will be broadened, enhancing bondholder security.

CONTACT: Susan Fitzgerald, 212/553-7762