Fitch Affirms 'AA-' Rating for Texas Christian University, TX

Business Wire, March 6, 2003

Business Editors

NEW YORK--(BUSINESS WIRE)--March 6, 2003

Fitch Ratings affirms the 'AA-' rating on $30 million Red River Education Finance Corporation higher education variable rate demand revenue bonds (VRDB), series 2001, and $81 million fixed rate revenue bonds, series 1997. Fitch also affirms the 'AA-/F1 ' rating on $50 million VRBDs series 2000. The Rating Outlook is Stable.

The long-term 'AA-' rating reflects TCU's stable enrollment, large endowment and substantial liquidity. Total university enrollment was 8,074 for fall 2002, which represents a 9% increase from fall 1998. Additionally, applications increased for fall 2002, despite a 15% increase in tuition, which was implemented for the 2001-2002 academic year. TCU's undergraduate acceptance rate was 71.4% for fall 2002. Though this rate is high when compared with other 'AA' category institutions rated by Fitch, it has declined from 77.4% in 1998. A high acceptance rate is viewed by Fitch as a flexibility limitation in the event the university experiences a decrease in applications.

The endowment, $763 million as of May 31, 2002, is significant and represents an endowment per full time equivalent student of $104,730. Available funds which include unrestricted cash and investments are significant and provide strong liquidity for TCU. As of May 31, 2002, available funds were $597.1 million and would cover approximately three years of fiscal 2002 unrestricted expenses. In addition, TCU has identified $200 million as of December 2002 which would provide internal liquidity for TCU's outstanding $50 million VRDBs. The coverage of VRDB exposure, including principal and accrued interest at the maximum rate of 15% for 30 days, is 4.0x. This level of liquidity supports Fitch's 'F1 ' rating on the bonds.

Concerns include limited revenue diversity and a relatively high acceptance rate for freshmen coupled with a decline in the matriculation rate. Tuition and fees represent approximately 52.3% of TCU's unrestricted revenues and an additional 31% is generated through fundraising and investment income. Though the heavy reliance on tuition and gifts is typical of private universities, and though TCU did not experience any decline in applications with the implementation of the fall 2001 tuition increase, the monitoring by TCU of enrollment and future tuition increases is critical. Additionally, given its reliance on investment income and fundraising, the university should closely monitor these funding sources should any cost-cutting actions be necessary due to further weakening of the economy.

TCU, founded in 1874, is a private, coeducational university located on a 237-acre campus located in Fort Worth, TX. The composition of the student body is approximately 85% undergraduate and 15% graduate, and 48% of students reside on campus.