Fitch Affirms The Ohio State Univ's Short-Term Rating at 'F1 '
GRBs are secured by a pledge of unencumbered revenues of The Ohio State University.
KEY RATING DRIVERS
FLAGSHIP CREDIT CHARACTERISTICS: OSU, the state's flagship public university and premier research institution, exhibits consistently positive financial performance that is fueled by a fairly diverse revenue base; with solid balance sheet resources and liquidity; a manageable debt burden; and healthy level of student demand. Fitch maintains a long-term 'AA' rating on OSU's general revenue bonds, with a Stable Outlook.
RESOURCE SUFFICIENCY: The 'F1+' rating is based on OSU's ability to cover the maximum potential liquidity demand presented by its variable rate debt obligations by at least 1.25x from internal resources.
REDUCTION IN LIQUID RESOURCES: Material erosion in internal resources and/or significant downward movement in The Ohio State University's long-term rating, while unlikely, will negatively affect the short-term rating.
Founded in 1870 as the Ohio Agricultural and Mechanical College, a land grant institution, OSU is one of 13 publicly supported state universities of higher education within Ohio. The university's main campus, which accounts for approximately 90% of total headcount and is the location of the OSU Health System and the medical center, is located in Columbus, the state capital.
OSU continues to enjoy strong student demand. Applications for fall 2015 reflect an increase of approximately 7% over the prior year and total headcount is expected to exceed 65,000. OSU Management expects fiscal 2015 to show another positive operating year, based on increased operating revenue, largely due to strong healthcare operations. While state support was relatively flat in fiscal 2015, fiscal 2016 is expected to show an increase.
OSU has approximately \\$596.4 million of variable rate demand bonds (VRDB) outstanding. In the event of a failed remarketing, OSU would draw upon its internal liquidity for support. As of June 30, 2015, OSU's short and intermediate term non-endowment investment pool had a market value of \\$1.95 billion. After adjusting these funds, based on asset type and maturity, per Fitch's 'Short Term Rating Criteria', the resource level declines to \\$1.63 billion, still providing a healthy 2.73x coverage. On an even more conservative basis and including only cash and cash equivalents, coverage remains sufficient, at 1.50x. For an 'F1+' rating, Fitch expects coverage of at least 1.25x.