Fitch Rates Texas Christian University's Refunding Bonds 'AA-'

Business Wire, Nov 9, 2006

NEW YORK -- Fitch Ratings assigns an 'AA-' underlying rating to the $40 million Red River Education Finance Corporation Higher Education revenue bonds (Texas Christian University Project) series 2006. Fitch also affirms the 'AA-' and 'AA-/F1 'on outstanding parity bonds listed below. The Rating Outlook is Stable.

The bonds are expected to be sold on or about Nov. 28 through negotiation by JPMorgan and Estrada Hinojosa & Company, Inc. Bond proceeds will be used to refund a portion of the outstanding series 1997 Fort Worth Higher Education revenue bonds, (Texas Christian University Project), series 1997.

The long term 'AA-' rating reflects Texas Christian University's (TCU) increasing enrollment, large endowment and substantial liquidity. Total university headcount enrollment was 8,865 for fall 2006, which represents a 1.3% increase from the previous fall semester and a 9.8% increase since fall 2002. The endowment, $1.06 billion as of Sept. 30, 2006, is significant and represents an endowment per full time equivalent of $129,100. Available funds, which include unrestricted and temporarily restricted cash and investments, are significant and provide strong liquidity for TCU. As of May 31, 2006, available funds were $876.9 million, and would cover over 3.9 years of fiscal 2006 unrestricted expenses.

The short term 'F1 ' rating affirmation on the outstanding variable rate demand reflects the level of investments that would be available in the event of a failed remarketing of the variable rate bonds (VRDBs). As of Sept. 30, 2006, TCU had identified $153 million of fixed income securities and $150 million of dedicated bank lines of credit which would provide internal liquidity for TCU's outstanding $130 million VRDBs. TCU also has $30 million of outstanding VRDBs with a term that expires in 2009. The coverage of VRDB exposure, excluding the 2009 term, and including principal and accrued interest on $130 million at the maximum rate of 15% for 30 days, is 2.3 times (x).

The major concerns are TCU's limited revenue diversity and high debt burden. Tuition, fees and student generated revenues through auxiliary services represent approximately 73% of TCU's fiscal 2006 unrestricted revenues. The concern over the heavy reliance is partially mitigated by TCU's growth in enrollment and significant endowment fund. TCU's scheduled pro-forma maximum annual debt service (MADS) of $13.9 million would consume 5.6% of fiscal 2006 revenues. Additional debt issuance is expected to be minimal, with $20 million expected in 2007. Fitch believes that the debt burden is manageable given the significant level of financial assets of TCU.

Fitch affirms the following ratings:

--Red River Education Finance Corporation Higher Education (Texas Christian University Project) revenue bonds, series 2005 at 'AA-';

--Red River Education Finance Corporation Higher Education (Texas Christian University Project) variable-rate demand revenue bonds, series 2000 at 'AA-/F1 ';

--Red River Education Finance Corporation Higher Education (Texas Christian University Project) variable-rate demand revenue bonds, series 2001 at 'AA-/F1 ';

--Red River Education Finance Corporation Higher Education (Texas Christian University Project) variable-rate demand revenue bonds, series 2006 at 'AA-/F1 ';

--Fort Worth Higher Education (Texas Christian University Project) revenue bonds, series 1997 'AA-'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.