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

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed its 'F1+' rating on the Rectors and Visitors of the University of Virginia's (UVA, or the university) approximately $78.6 million of outstanding series 2003A multi-modal general revenue pledge bonds and $300 million taxable and tax-exempt commercial paper (CP) program.

SECURITY

Revenue bonds and CP are an unsecured, general obligation of UVA, payable from all legally available funds.

KEY RATING DRIVERS

FINANCIAL STRENGTH OF UVA: The university maintains a strong financial profile, fueled by a diverse revenue base; strong balance sheet liquidity; robust fundraising; and manageable debt burden. Fitch rates UVA's general revenue pledge bonds 'AAA'.

RESOURCE SUFFICIENCY: The 'F1+' rating is based on UVA's ability to cover the maximum potential liquidity demands presented by its variable rate debt programs by at least 1.25 times (x) from internal resources. Such resources include cash; highly liquid, highly rated investments; and dedicated liquidity facilities.

CREDIT PROFILE

Internal Liquidity Supports Short-Term Debt Obligations

The 'F1+' rating is based on the availability of highly liquid, highly rated securities to cover potential maximum liquidity demands presented by UVA's outstanding multi-modal general revenue pledge bonds and CP notes. To supplement internal liquidity sources, UVA maintains the ability to draw on dedicated lines of credit in the aggregate amount of $250 million. Of the university's substantial cash and investments, approximately $543.3 million, including U.S. government and agencies securities (after Fitch discounts based on maturity) was available on a same-day basis on June 30, 2012.

On a combined basis, UVA's liquid assets totaled $793.3 million and covered its liquidity needs of $378.6 million by a healthy 2.1x. This includes $78.6 million of outstanding multi-modal revenue bonds (currently in CP mode) and its maximum CP authorization of $300 million ($127.5 million currently outstanding). To limit potential demands on its liquidity, UVA limits the amount of CP notes that can come due on a given day to $40 million. For an 'F1+' rating, Fitch typically expects coverage of at least 1.25x. UVA's procedures for handling a failed remarketing of multi-modal bonds and/or rollover of CP are highly detailed, reflecting favorably on management.

Recent Governance Issues Addressed

The recent, highly publicized conflict between UVA's Board of Visitors (the board) and its president has been addressed. Following protests staged by students, faculty and others, the board unanimously voted to reinstate Dr. Teresa Sullivan as president less than one month after her resignation on June 10. She retained her existing five-year contract, which has three years remaining. However, the university's chief operating officer has subsequently resigned. While the governance turmoil is concerning to Fitch, the reinstatement of Dr. Sullivan with the support of students and faculty, partly mitigates concern over further management disruption. Moreover, based on UVA's prestigious reputation, Fitch does not anticipate this situation to result in material erosion of the university's strong demand and financial profiles.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Criteria for Assigning Short-Term Ratings Based on Internal Liquidity' (June 15, 2012);

--'Fitch Rates University of Virginia's Series 2011 Rev Bonds 'AAA'; Outlook Stable' (Sept. 20, 2011).

Applicable Criteria and Related Research:

Criteria for Assigning Short-Term Ratings Based on Internal Liquidity

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=681822

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