Moody’s Investors Service assigned a first time rating of A2 to Marquette University’s debt ahead of its $110 million debt issue next month.

The university will have $237 million of rated debt — of which $188 million is fixed rate — after the sale. The Wisconsin Health and Educational Facilities Authority is serving as the conduit issuer.

The upcoming deal is divided into four pieces: two fixed-rate series for $29.4 million each, another floating-rate series for $31.8 million, and a fourth floating-rate series for $18.7 million. Lehman Brothers and Robert W. Baird & Co. were named as underwriters. Marquette officials could not be reached immediately to say if they would replace Lehman following its bankruptcy filing on Monday.

Proceeds from the sale will refund outstanding debt and finance construction of a new law school building and parking facility.

The bonds are an unsecured obligation of the university, with the fixed-rate bonds being further secured by an additional bonds test that limits maximum annual debt service to 12% of total unrestricted revenues and unrestricted net assets.

Under the letter of credit supporting the floating-rate bonds, Marquette is required to maintain a ratio of cash flow to debt service of 1.1 to 1.0 and a ratio of funded debt to capitalization of no more than 50%. The LOC, to be provided by JPMorgan Chase & Co., also requires Marquette to maintain a rating of at least Baa2 at all times.

“Moody’s expects the university will continue to meet these tests by comfortable margins,” analysts wrote.

Marquette’s credit benefits from growing financial resources that have risen by nearly 50% between fiscal 2003 and fiscal 2007 to $429 million on the strength of improved fundraising and investment returns. The university’s selectivity has improved to 67% for last fall due to higher application numbers, driven in part by its efforts to enhance its facilities and appearance. Steady increases in tuition to $17,176 last fall have helped operating results. Student charges represent 74% of operating revenue.

Challenges include its dependence on students from Wisconsin and Illinois for 76% of entering freshman this fall, which requires expanded recruiting efforts because of projected declines in high school graduates in those two states over the next decade. The university’s fiscal resources are also lower per student than its peers in the same rated category, and the LOC includes terms that are subject to termination risks.

Marquette University is a private Jesuit school founded in 1881 in downtown Milwaukee. It includes 12 colleges and schools and offers both undergraduate and graduate degrees with a full time enrollment of more than 10,000.

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