DALLAS — The Amarillo Junior College District merited an upgrade from Standard & Poor's to AA-plus from AA as it prepares to issue $16 million of general obligation bonds next week.
Analysts said the higher rating reflects the district's "strong and likely sustainable financial performance trend, evidenced by very strong reserves and substantial taxing flexibility."
Chief financial officer Terry Berg said the upgrade precludes the need for bond insurance.
"I'm very happy that S&P did upgrade us to AA-plus as it's a great thing for our school," Berg said. "Going out for bond insurance has become a non-event since bond insurers have basically gone under. So without the ability to go out for the insurance, the AA-plus rating certainly helps."
Southwest Securities Inc. and RBC Capital Markets are co-managers for the coming issue, which is scheduled to price Monday. The bonds are structured as serials maturing in 2016 through 2029.
First Southwest Co. is financial adviser to the district in the Texas panhandle and Underwood, Wilson, Berry, Stein & Johnson PC is bond counsel.
Jason Hughes, vice president at First Southwest, said an issuer's underlying rating has "become more important than ever" as credit spreads have widened and bond insurers have been downgraded or gone out of business completely over the past few months.
"There is certainly a shrinking pool of issuers in the double-A category going to the insurers," he said.
Proceeds from next week's issue will fund the second phase of the district's four-phase construction schedule outlined in a $68.3 million bond package approved in November 2007 by about 64% of the electorate. The district plans to upgrade various student dormitories and build a new facility to house its nursing and dental programs among other projects.
Following this sale, the district will have $30.3 million from that bond package with plans to bring another $16 million to market next summer and issue the remainder in 2011.
Standard & Poor's said additional credit strengths include the district's diverse and steadily expanding property tax base with low overall debt. Mitigating factors include the area's below-average income levels and low tax rate, according to analysts.
The district's property tax base averaged 6% growth annually the past three years to $9.78 billion for fiscal 2009.
Fitch Ratings assigned a AA rating to the sale, citing the college's satisfactory financial performance, low debt levels and historically steady enrollment and tax-base growth.
"While AJCD draws the majority of its students from a limited geographical area, the district is competitively positioned in its large, regional service area with multiple campuses and low tuition rates," Fitch analysts said.
The district's total enrollment for the fall of 2008 was about 13,250 and the student population has risen by about 4% each fall since 2003, according to Fitch.
Berg said while enrollment growth has been steady, it has dipped somewhat of late and "looks to be up about 16% for the summer and 19% for the fall, but anything can happen between now and September."
Moody's Investors Service rates the junior college district's underlying GO credit at Aa3.
