Fitch Affirms Univ of Oklahoma Housing Revs 'A+'; Outlook Negative

Business Wire, Dec 19, 2008

NEW YORK -- Fitch Ratings affirms its 'A+' rating on the University of Oklahoma's (OU, or the university) student housing revenue bonds, series 2004. The Rating Outlook remains Negative.

The Negative Outlook continues to reflect the overall weakening of housing system occupancy levels and debt service coverage (DSC) over the past several years. Although management has been successful in addressing down-trending occupancy, future improvement may be difficult especially given the university's projected flat to potentially declining enrollment.

Total occupancy for university housing improved to 84.5% in fiscal 2008 from 76% in fiscal 2007. Consequently, DSC improved to a reported 2.5 times (x) in fiscal 2008 from 1.9x in fiscal 2007. Occupancy rates for the first half of fiscal 2009 show additional improvement. Should this improvement be sustained, leading to stronger coverage levels, upward revision in the outlook would be considered.

The 'A+' rating continues to reflect a base level of demand for housing on the university's Norman campus; a requirement for all freshman students to live on campus, unless exempted; and OU's autonomous control in setting room and board charges to achieve a minimum 1.25x coverage of housing system bond debt service.

Housing bonds are secured by a pledge of the net revenues of the housing and food services department. No additional bonds will be issued on parity with the series 2004 student housing bonds as all future financings for housing are expected to financed by the university's issuance of general revenue bonds (rated 'AA-' by Fitch). For housing revenue bonds, OU's regents covenant to provide sufficient net revenues to cover debt service by at least 1.25x annually. Even with recent occupancy declines and related housing system operating pressures, Fitch believes coverage above the covenanted minimum is achievable.

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.