Fitch Affirms Vanderbilt University's Short-Term Rating at 'F1+'

Business Wire, Dec 15, 2008

NEW YORK -- Fitch Ratings affirms the short-term 'F1+' rating on Vanderbilt University's (Vanderbilt, or the university) $675 million commercial paper (CP) program. Fitch also affirms the short-term 'F1+' rating on the university's approximately $338.2 million of outstanding variable-rate demand revenue bonds, issued through Nashville and Davidson County Metropolitan Government Health & Educational Facilities Board

Vanderbilt intends to modify its CP program in order to remove the existing constraints on the amount that can be issued on a taxable and on a tax-exempt basis. The current structure authorizes the university to issue up to $600 million of tax-exempt CP and up to $75 million of taxable CP. Following the program's modification, Vanderbilt will gain the flexibility to issue up to $675 million in taxable CP, as long as the combined amounts of taxable and tax-exempt CP outstanding do not exceed $675 million. There is no plan to increase the aggregate maximum authorized amount at this time.

The 'F1+' rating is based on Vanderbilt's own internal liquidity, primarily supported by its significant level of highly rated, highly liquid investments. As of Oct. 31, 2008, Vanderbilt had $3.9 billion of total cash and investments. Of this amount, the university identified approximately $624 million in same-day or next-day available funds. Included within this calculation are revolving credit agreements from Wachovia Bank, N.A. for $125 million and Bank of America, N.A. for $100 million, the terms of which were reviewed by Fitch. Both revolving credit agreements are solely dedicated to support a failed remarketing. For Fitch's liquidity analysis, only cash and cash equivalents, U.S. government and agency securities, investment grade corporate notes, and dedicated revolving credit agreements are considered in assigning the 'F1+' rating. Based on its liquidity level as of Oct. 31, 2008, Vanderbilt would be able to cover the failed remarketing of its $338.2 million of outstanding variable-rate demand bonds and the failed rollover of its outstanding CP notes by 1.32 times (x). To limit potential calls on its liquidity, the university restricts the amount of CP that may come due on any given day to $50 million.

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