DALLAS — Texas Tech University System's revenue finance system bonds rose a notch on the Moody's Investors Service scale to Aa1 and gained a positive outlook from Standard & Poor's.
Moody's upgraded the system's outstanding revenue bonds even though the agency is not officially rating $322 million coming to market the week of March 16.
The upgrade puts Moody's in line with Fitch's AA-plus rating. S&P affirmed its AA rating but its positive outlook indicates a possible upgrade that would put all three ratings at the same level.
"The revised outlook reflects the continuing strengthening of the balance sheet and improvement in operating performance," S&P analyst Bianca Gaytan-Burrell wrote.
The upcoming deal includes $247 million of Series A tax-exempt bonds reaching final maturity in 2030 and $75 million of taxable Series B reaching final maturity in 2035.
Senior managers on the Series A bonds are Citi and RBC Capital, with co-managers JPMorgan and Siebert Brandford Shank & Co.
Senior managers on Series B are Wells Fargo Securities and Raymond James, with Barclays and Estrada Hinojosa & Co. as co-managers.
Mary Williams, senior vice president at First Southwest Co., is financial advisor, with Norton, Rose, Fulbright as bond counsel.
Fitch Ratings has as stable outlook.
"TTUS demonstrates consistently strong operating performance, solid balance sheet ratios for the rating category, and stable enrollment and demand metrics," Fitch Ratings analyst Susan Carlson wrote March 6.
Proceeds from this year's bonds will provide about $36 million of new money for various capital projects, and provide long-term finance on $106 million of commercial paper. The remainder of the proceeds will refund previous issues.
Jim Brunjes, TTUS chief financial officer, estimates savings of up to 11.75% on the refunding portion of the deal. Among the candidates for refunding are 2003, 2006 and 2009 bonds, Brunjes told the board of regents at a December presentation.
With revenues of $1.6 billion over four campuses, TTUS enjoys growing brand recognition with increasing research, and a conservative approach to financial leverage, according to Moody's analyst Mary Cooney.
"Challenges facing TTUS are managing the pace of growth and some continued geographic concentration with over 90% of undergraduates drawn from within Texas," Cooney wrote.
With its original campus in Lubbock, TTUS includes Texas Tech University Health Sciences Center, Angelo State University, and Texas Tech University Health Sciences Center at El Paso. In fiscal year 2014, the system enrolled nearly 47,000 students.
The RFS debt is secured by a broad pledge of revenues, including tuition, fees, and auxiliary revenues, and funds other than state appropriations. Pledged revenues in FY 2014 totaled $1.3 billion, providing 20 times coverage of maximum annual debt service, according to Moody's.
The ratings report came out as the TTUS Board of Regents approved a 2.18% net increase in tuition and fees for the 2015-16 academic year.
Texas Tech's overall tuition and fees of $7,978 for 24-semester credit hours for the 2015-16 academic year will rank third-lowest among nine peer institutions throughout the state, including the University of Texas and Texas A&M University, and third-lowest among Big 12 Conference member institutions, officials said.
TTUS is seeking about $220 million of tuition revenue bonds under Senate Bill 150, which proposes $2.68 billion of TRBs for all of the state's university systems.
Lawmakers have not approved tuition revenue bonds since a special session in 2006 that allocated $2 billion for the program.
