Bangkok--23 Jun--Standard & Poor's
Standard & Poor's Ratings Services revised the rating outlook to negative from stable on Western State College Board of Trustees, Colo.'s series 2009 revenue bonds, issued for Western State College. We also affirmed our 'A-' underlying rating (SPUR) on those 2009 bonds. In addition, Standard & Poor's assigned its 'A-' SPUR to the board of trustees' series 2010A, B, and C revenue bonds, issued for the college. The outlook is negative. The SPUR is based on the college's pledge of net auxiliary revenues, 10% of tuition revenues, and a portion of a new facilities fee; it does not incorporate the state intercept program, for which the bonds have been qualified. In a separate rating action, Standard & Poor's also assigned its 'AA-' rating to the college's 2010A, B, and C bonds based solely on the state intercept program. The outlook on the 'AA-' rating is stable.
"The rating action reflects the college's extremely slim coverage of debt service by projected pledged revenues, extremely high debt burden, and enrollment challenges," said Standard & Poor's credit analyst Carlotta Mills.
In our view, overall maximum annual debt service, at $7 million in 2019 for all debt, results in an extremely high debt burden of more than 19%.
The 2003 bonds have a first charge on pledged net auxiliary revenues (this lien is closed). The 2003 bonds' debt service is level at about $1.37 million through 2018, when it peaks at $2.6 million and then drops to $1.1 million, maturing in 2025. In 2011, the college estimates that net pledged revenues will be $2.4 million (before 10% of tuition), leaving $1.1 million, after paying debt service on the senior 2003 bonds. According to the university, with the addition of tuition revenues, debt service of $1 million on the 2009 bonds should be met easily. With the addition of a new facility fee and not including the BABs subsidy, coverage is estimated to be about 1.3x. We view the security on the 2009 and 2010 bonds to be equivalent to an unlimited student fee pledge of the college. However, we also consider that sufficient debt service coverage without use of the 10% tuition pledge (which might stress the operating budget) is highly reliant on enrollment growth projections and timely and strong housing occupancy levels.
Western State College of Colorado is one of six public colleges in Colorado. Headcount enrollment dropped by a collective 9.7% since fall 2002 and 2% alone from fall 2008 to 2,266 in fall 2009. Full-time-equivalent enrollment fell 0.5% from fall 2008 to 2,051 in fall 2009.
RELATED CRITERIA AND RESEARCH
USPF Criteria: Higher Education, June 19, 2007
General Criteria: Enhanced Methodology And Assumptions For Rating Government-Related Entities, June 29, 2009
Complete ratings information is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
Media Contact:
Ana Sandoval, New York (1) 212-438-5095,
[email protected]
Analyst Contacts:
Carlotta R Mills, San Francisco (1) 415-371-5020
Jessica Matsumori, San Francisco (1) 415-371-5083