Fitch Rates Agnes Scott College, GA Rev Rfdg Bonds 'AA'; Outlook Stable

Business Wire, June 24, 2009

NEW YORK -- Fitch Ratings assigns an 'AA' rating to approximately $37,315,000 of revenue refunding bonds, series 2009 (the bonds) issued by the Georgia Private Colleges and Universities Authority (the authority) on behalf of Agnes Scott College (ASC). The bonds are expected to price via negotiated sale on or about June 30, 2009. Proceeds of the bonds will refund a portion ($36.4 million) of outstanding fixed rate series 1999 bonds ($58.7 million) and pay various costs of issuance. Fitch also affirms its unenhanced on the authority's approximately $64.3 million of outstanding ASC fixed rate revenue and revenue refunding bonds and $11.6 million of outstanding variable rate revenue bonds (revenue bonds). Revenue bonds represent an unsecured general obligation of ASC. The Rating Outlook is Stable.

The 'AA' rating reflects ASC's substantial balance sheet resources despite reduced investment valuations given financial market turbulence; limited capital needs; and a proactive management team. Credit concerns center primarily around ASC's significant reliance upon endowment spending to balance operations; recent declines in enrollment; and a high pro forma debt burden.

ASC's balance sheet resources remain its primary credit strength. Fiscal 2008 available funds, or cash and investments not permanently restricted, totaled $259.0 million, representing a strong 563.1% of operating expenses and 295.3% of pro forma leverage. Excluding non-marketable asset classes from this calculation, and reflecting a year to date reduction in endowment value of approximately 24.7%, adjusted available funds decline sharply, though remain in line with the 'AA' category. As ASC's portfolio has become increasingly exposed to less liquid, more volatile investments, management has addressed this risk by more closely monitoring portfolio performance and tracking liquidity needs on a daily, monthly, and quarterly basis.

To balance operations on an annual basis, ASC relies heavily upon its endowment spending policy. The flexibility of this policy, which permits annual spending of between 3% and 6% of the of the previous fiscal year end 12 quarter average market value, is viewed favorably by Fitch as it enables management to align operating expenditures with investment performance. For fiscal 2008, ASC transferred approximately $17.0 million from the endowment to operations, representing a 5.9% spending rate. ASC's ability to sustain such draws over the past five fiscal years while maintaining a stable level of available funds evidences that inflows to the fund, such as gifts and market appreciation, have generally exceeded the rate of spending. To maintain its 'AA', Fitch would expect this balance to continue.

Despite a significant pro forma debt burden, with maximum annual debt service representing approximately 18.8% of fiscal 2008 operating revenues, ASC has no future debt plans as it has invested annually in its physical plant to keep deferred maintenance to a minimum. Moreover, ASC's management has stated that any future debt financing for facilities would require a complete fundraising offset. While no comprehensive capital campaign is currently in progress, ASC has remained visible with its donor base and expects to launch the public phase of such an initiative shortly in conjunction with its current strategic planning efforts.

Founded in 1889, ASC is a highly selective, independent, national liberal arts college for women located in metropolitan Atlanta. During fall 2008, ASC enrolled 813 students, primarily at the undergraduate level (98%). Over the past three admission cycles, ASC's enrollment fell at an average annual rate of 4.0%; various initiatives and strategies to reverse these declines are expected to yield an increase in headcount for fall 2009. A failure to stabilize enrollment at or above the current level would yield credit pressure, particularly as the student related fees represented approximately 54.9% of fiscal 2008 operating revenues.

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.