Fitch Assigns 'AA-' Rating for Texas Christian University

Business Wire, March 15, 2005

NEW YORK -- Fitch Ratings assigns an 'AA-' underlying rating to approximately $75 million Red River Education Finance Corporation higher education revenue bonds (Texas Christian University (TCU) Project), series 2005. Fitch also affirms the 'AA-' and 'F1 ' ratings on the outstanding parity bonds listed below. The bonds are scheduled to sell on or about March 21 through Lehman Brothers and JP Morgan. Bond proceeds will be used to refund a portion of outstanding series 1997 parity bonds. The Rating Outlook is Stable.

The long-term 'AA-' rating reflects TCU's stable enrollment, large endowment, and substantial liquidity. Total university enrollment was 8,632 for fall 2004, which represents a 4.3% increase from the previous fall semester, and a 7.2% growth since fall 2001, when a 15% increase in tuition was implemented. Each subsequent year has had an 8%-9% increase. The endowment, $807 million as of May 31, 2004, is significant and represents an endowment per full-time equivalent student of $101,181. Available funds, which include unrestricted and temporarily restricted cash and investments, are significant and provide strong liquidity for TCU. As of May 31, 2004, available funds were $617.6 million and would cover slightly over three years of fiscal 2004 unrestricted expenses.

Fitch's major concerns are TCU's limited revenue diversity and the December 2004 accreditation warning by the Southern Association of Colleges and Schools (SACS). Tuition, fees and student-generated revenues through auxiliary services represent approximately 75% of TCU's fiscal 2004 unrestricted revenues. The concern over the heavy reliance is partially mitigated by TCU's ability to implement substantial increases in tuition and fees over the past five years while consistently growing enrollment. For fall 2005, the TCU board has approved a 7.8% increase in tuition and fees which would increase to $21,280 from $19,700.

On Dec. 6, 2004, the Commission on Colleges Southern Association of Colleges and Schools placed TCU's accreditation status on warning. The action was taken in response to non-compliance with SACS principles primarily regarding TCU's board of trustee processes. TCU's academic programs are not in question. The commission will be reviewed for compliance in December 2005. TCU reports that the trustees and administration are resolving the issues with SACS and will demonstrate full compliance before the December 2005 deadline. Fitch believes that failure to maintain accreditation would have a negative impact on the rating.

TCU has both outstanding long-term fixed-rate bonds and $80 million of variable-rate demand bonds (VRDBs), series 2000 and 2001, for which it provides internal liquidity in the event of a failed remarketing. Fitch has an outstanding short-term rating of 'F1 ' and long-term 'AA-' rating on the series 2000 VRDBs. Fitch has only a long-term 'AA-' rating on the series 2001 VRDBs, since they have a term rate period of five years. TCU has identified $186.4 million as of Dec. 31, 2004, which would provide liquidity for TCU's VRDB exposure and provides ample coverage of the principal and accrued interest.

Outstanding Bonds as of May 31, 2004:

-- $30,000,000 Red River Education Finance Corporation higher education variable rate demand revenue bonds (Texas Christian University Project) series 2001 'AA-';

-- $50,000,000 series 2000 'AA-/F1 ';

-- $77,601,000 Fort Worth Higher Education revenue bonds, series 1997 'AA-'.