Fitch IBCA Upgrades University of Southern California — USC —

Business Wire, April 20, 2000

Business Editors

NEW YORK--(BUSINESS WIRE)--April 20, 2000

Fitch IBCA upgrades rating to `AA ' from `AA' for California Educational Facilities Authority (CEFA) -- University of Southern California Bonds, series 1993, 1993B, 1997A, 1997C, 1998A, 1999A and University of Southern California Taxable Bonds, Series 1998.

The `AA ' rating is primarily attributable to the University of Southern California's (USC or the University) continued upward trend in operating performance, premier University research status, favorable demand and selectivity trends, strong fundraising history, and a performance based management team. The debt burden is manageable with average annual debt service representing only 1.3% of unrestricted revenues. USC has adopted a liability management plan which limits the amount of outstanding debt to $400 million. Currently, USC has $231 million outstanding but plans to increase to approximately $400 million by 2003.

As the oldest independent research and teaching facility in the western United States, USC offers a well-established, large and diverse array of undergraduate and graduate educational curricula for 28,766 students as of the 1999 fall semester. Strong historic support from federal grant agencies and private donors contribute to the University's national research prominence and augment program and revenue base diversity.

USC's revenues are diverse with tuition being the largest source of revenues, approximately 31% of total unrestricted revenues. USC's balance sheet is strong with net assets of $2.58 billion and of this total, $1.76 billion are unrestricted. USC's total endowment as of June 30, 1999 was $1.59 billion. USC's fundraising ability has been strong. The fundraising goal for 1993-2000 was $1 billion. As of Dec. 31, 1999, USC had raised approximately $1.5 billion and amended their goal to $2 billion to be raised by 2002. This level of resources provides comfortable cushion for a manageable debt load as reflected by an endowment to proforma debt ratio of over 6.0.

The most significant area of concern centers on tuition competitiveness in the event of an economic downturn. Approximately 62% of undergraduates are from California. While USC's tuition compared to its private national peer group is competitively priced, it exceeds the tuition typically charged by other universities in California. Fitch IBCA's consideration of this risk is tempered by the University's long history of successful operations and budgetary discipline, demonstrated track record of garnering grants and other funding support.