Fitch Ratings said it has downgraded to A-plus from AA-minus the rating on Baylor University's outstanding debt and assigned an A-plus rating approximately $200 million Baylor taxable fixed rate bonds, series 2012A.

The bonds are expected to be sold via negotiation on or about the week of Oct. 15. Proceeds will be used to fund construction of a new football stadium, an academic building, a research facility and other capital projects as well as to pay associated costs of issuance.

The bonds downgraded are $232.1 million Waco Education Finance Corporation fixed rate revenue and revenue refunding bonds; $100.145 million Clifton Higher Education Finance Corporation fixed rate revenue bonds; and $71.8 million Waco Education Finance Corporation variable rate demand revenue bonds (underlying rating.

Fitch affirmed at F1-plus Baylor's $50 million taxable commercial paper program.

The rating outlook is stable.

The downgrade reflects a material increase in outstanding debt and associated carrying costs which will pressure the university's recently reduced operating surpluses and financial cushion.

The university's still-positive operations and existing balance sheet resources continue to provide an adequate level of financial flexibility, particularly given the university's strong demand profile and stable enrollment.

Baylor's consistently solid student demand provides a strong basis for the university's enrollment goals, which focus largely on maintaining the incoming freshman class size at the current level (fall 2012) and improving student retention.

The university's management team engages in detailed long-term financial planning including consideration of an internal amortization schedule for its non-amortizing debt obligations while maintaining balanced operations.

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