Fitch Affirms University of Virginia's Short-Term Rating at 'F1 '
The revenue bonds and CP are unsecured general obligations of UVA, payable from all legally available funds.
KEY RATING DRIVERS
FINANCIAL STRENGTH OF UVA: The university maintains a strong credit profile fueled by a diverse revenue base; substantial balance sheet resources; robust fundraising activity; and low debt burden. Fitch maintains a long-term 'AAA' rating on UVA's general revenue pledge bonds, with a Stable Rating Outlook.
SUFFICIENT LIQUID RESOURCES: The 'F1+' rating is based on UVA's ability to cover the maximum potential liquidity demands presented by its variable-rate debt programs by at least 1.25x from internal resources. Such resources include cash and highly liquid, highly rated investments.
REDUCTION IN LIQUID RESOURCES: Erosion to the University of Virginia's internal liquid resource base or to its general credit profile to the point where the university could no longer sufficiently cover its variable-rate obligations, while highly unlikely, would put downward pressure on the rating.
Chartered in 1819, UVA is a highly selective, comprehensive public university located in Charlottesville, Virginia. The university's fall 2015 undergraduate acceptance rate was 30%, with a solid 40% of accepted students choosing to enroll. UVA's prestigious graduate programs, including the Darden School of Business and the School of Law maintain equal or higher admissions selectivity. Fall 2015 full-time equivalent enrollment totaled 22,044 students, down a modest 1.2% from the prior year.
UVA's strong financial profile is characterized by consistently positive operations that are funded by a diverse operating budget; substantial balance sheet resources, with exceptional management of the long-term investment pool provided by University of Virginia Investment Management Company; impressive philanthropic activities; and a low debt burden. UVA also benefits from the strong competitive and financial position of the University of Virginia Medical Center, a fully integrated division of the university which provides nearly half of total operating revenues.
INTERNAL LIQUIDITY SUPPORTS SHORT-TERM DEBT OBLIGATIONS
The 'F1+' rating is based on the availability of highly liquid, highly rated securities to cover potential maximum liquidity demands presented by UVA's outstanding CP notes. To supplement internal liquidity sources, UVA maintains the ability to draw on three dedicated lines of credit in the aggregate amount of \\$200 million. Of the university's substantial cash and investments, approximately \\$1.39 billion, including cash and cash equivalents, and U.S. government and agencies securities (after discounts based on maturity per Fitch's short-term rating criteria) was available on Dec. 31, 2015.
These liquid assets provide strong coverage of the university's \\$300 million of authorized taxable and tax-exempt CP (current outstanding is \\$73.3 million), exceeding the 1.25x coverage Fitch expects for an 'F1+' rating.
To limit potential demands on its liquidity, UVA limits the amount of CP notes that can come due on a given day to \\$40 million. The university's detailed procedures for handling a failed remarketing of multi-modal bonds and/or rollover of CP are regularly reviewed, reflecting favorably on management.
In January 2016, the university added \\$300 million of operating lines of credit in conjunction with moving large cash balances and short term investments into endowment longer term investments, which is expected to be done over the next 12 months, in line with the university's strategic priorities to achieve balance sheet optimization