Fitch Rates $159.1MM Waco Edu Fin Auth Texas 2008A&B 'AA-/F1+'

Business Wire, April 2, 2008

NEW YORK -- Fitch Ratings assigns a rating of 'AA-/F1 ' to the Waco Education Finance Corporation revenue refunding bonds, Baylor University issue tax-exempt variable rate demand bonds, series 2008, consisting of:

--$79,550,000 series 2008A; and

--$79,550,000 series 2008B.

The proceeds of the bonds, along with the fixed rate series 2008C revenue bonds (rated 'AA-' by Fitch), will be used to refund approximately $266.2 million of outstanding variable rate debt, including $220.6 million of weekly variable rate demand bonds (series 2002A & 2006), and $45.6 million of select auction variable rate securities (series 2002B, SAVRS).

The long-term 'AA-' rating reflects Baylor's sustained track record of healthy operating performance and liquidity; strong student demand and competitive academic profile; and an experienced management team which possesses a solid planning and financial/investment management background. Offsetting credit factors include Baylor's fairly dormant fundraising activity over the past five fiscal years, though recent organizational changes are addressing this concern; a moderately high reliance on student generated sources to fund the operating budget; and an increasing, though still manageable, debt burden which may be further pressured if planned capital projects are not offset by expected philanthropic support.

The short-term 'F1 ' rating on the bonds is based on the liquidity support of the standby bond purchase agreement (SBPA) provided by JPMorgan Chase Bank, N.A. The SBPA provides for the payment of the principal component of purchase price and up to 35 days of interest calculated at a maximum rate of 12% per annum based on a year of 365 days. The SBPA will expire on April 6, 2009, unless extended or earlier terminated pursuant to its terms. The remarketing agent for the bonds is Lehman Brothers. The bonds are expected to be delivered on or about April 8, 2008.

The bonds initially bear interest in the weekly rate mode, but may be converted to bear interest at the money market municipal, daily, monthly, quarterly, semiannual, term, or fixed rate. While the bonds bear interest in the weekly rate mode, interest is payable on the first Wednesday of each month, commencing May 7, 2008. Holders of bonds bearing interest at a daily or weekly rate mode may tender their bonds for purchase with prior notice. The SBPA covers the bonds while they are in the daily or weekly rate mode. The bonds are subject to a mandatory tender upon conversion of the interest rate modes, upon the expiration of the SBPA, and upon the occurrence of certain events of default under the SBPA. The bonds are also subject to mandatory and optional redemption.

For additional information on the long-term rating, please see a 'Baylor University' report on Fitch Research dated April, 2, 2008.

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.