Fitch Ratings Assigns an `AA-' to Wayne State University

Business Wire, June 24, 2004

NEW YORK -- The $60 million Board of Governors of Wayne State University (WSU, or the university) general revenue bonds, series 2004A, select auction variable-rate securities (SAVRS) are rated 'AA-' by Fitch Ratings. In addition, Fitch affirms its 'AA-' rating on the university's outstanding bonds listed below. The bonds are expected to be sold the week of July 1 through negotiation by Lehman Brothers. The Outlook is Stable.

The bond proceeds will be used to finance the construction of a 935-bed residence hall and to pay costs of issuance. The bonds are expected to be insured. Bondholders do not have a put option.

The 'AA-' rating is primarily attributable to WSU's low debt burden, significant level of state support, and increasing enrollment. With the issuance of the series 2004 bonds, the amount of bonds outstanding will have doubled since the end of fiscal 2001. Maximum annual debt service, including the issuance of the series 2004 bonds, would represent a modest use of 3.1% of fiscal 2003 unrestricted revenues. Fitch views the debt burden as growing but manageable.

A capital campaign to be announced publicly later this year is expected to provide aid for future facility and operating needs. An increased effort on fundraising has come as WSU has experienced reduced funding from the state. State appropriations represented 37% of fiscal 2003 unrestricted revenues. During fiscal 2003, state appropriations were reduced by 3.5%, or $8.9 million. At the beginning of fiscal 2004, WSU had additional reductions of 6.7%, or $16.5 million and then a 5%, or $12 million reduction midyear. To date, WSU has handled the reduced funding through non-academic staff hiring freezes and staff reductions, tuition increases, and increased receipts of funds through indirect cost recovery associated with research grants.

WSU has been able to increase tuition and fees without a negative impact on enrollment. Enrollment growth over the past few years reflects the university's historical efforts to recruit students that are the first in their family to go to college, as well as expansion of the university's honors program. The diverse program offerings coupled with WSU's competitive tuition have also contributed to enrollment growth. Although WSU raised lower division undergraduate tuition by 9.9% for fall 2003 to $5,609 to offset a reduction in state funding, its tuition remains below the state average of $5,895.

The most significant areas of concern center on the uncertainty of future reductions in state appropriations and on the concentration of the student body. Any future reductions in state appropriations would likely have a direct impact on academic programs. A reduction in academic faculty would result in larger class sizes and a reduced number of classes. These reductions, if they occur, could have a negative impact on enrollment. Enrollment stability is critical for maintaining the current rating.

WSU is a public university with its main campus in Detroit, Michigan. The fall 2003 headcount is 33,091, which is a 6.2% increase over that of fall 2002. The student draw is very concentrated. Approximately 77% of the university's students are from the Detroit area, and 84% are from Michigan. While the city of Detroit's long-term population losses, as well as significant drop-out rates and charter school enrollment losses, have been a concern for the city's school district, WSU enrollment has grown over the past five years by 6.7%. WSU accepts approximately 68% of the freshmen students that apply. The geographical concentration is partially mitigated by the fact that the number of freshmen that actually matriculate is impressive at 50%.

Board of Governors of Wayne State University general revenue SAVRS are rated as follows:

--$51,550,000, series 2003A, 'AA-';

--$45,700,000, series 2002, 'AA-';

--$26,400,000, series 2001, 'AA-'.

Board of Governors of Wayne State University general revenue bonds (taxable):

--$4,680,000, series 2003B, 'AA-'.

Board of Governors of Wayne State University general revenue bonds:

--$125,250,000, series 1999, 'AA-';

--$3,955,000, series 1993, 'AA-'.