Fitch Ratings said it upgraded to BBB-plus from BBB approximately $100.11 million of outstanding revenue financing system (RFS) bonds issued by the Texas Public Finance Authority on behalf of Texas Southern University (TSU or the university).
The rating outlook is revised to stable from positive.
RFS debt is secured by a broad pledge of all unencumbered revenues of the university, excluding state appropriations and restricted gifts and grants.
The upgrade reflects TSU's balanced operating results in fiscal 2012, stable financial resource levels and improved market position following the resolution of management-related accreditation issues that occurred in 2007.
TSU's renewed accreditation at the end of 2011 helped to strengthen demand for the fall 2012 class despite heightened academic requirements. The student population was affected by the restriction on Pell grant receipts that was implemented nationally in July 2012, which is expected to pressure enrollment in fall 2012.
The university maintains a high debt burden, however, Fitch views the burden as manageable given dedicated state appropriations that support capital appropriations bonds and a portion of RFS debt combined with adequate debt service coverage generated from operations.
TSU's existing management team has successfully corrected all deficiencies identified by the Southern Association of College and Schools (SACS) in 2007, when the school's accreditation was put on probation. The full 10-year affirmation that was granted in December 2011 underscores the strength of the current team.