Fitch Affirms 'BBB+' Rating For Nova Southeastern University, FL.

Business Editors

NEW YORK--(BUSINESS WIRE)--June 18, 2003

Fitch Ratings affirms its 'BBB+' rating on approximately $80.8 million in outstanding Broward County Educational Facilities Authority, FL revenue bonds, series 1994, 2000B and 2002B. All bonds were issued on behalf of Nova Southeastern University (NSU or the university). The Rating Outlook is Stable.

The 'BBB+' rating is supported by the university's increasing enrollment, history of stable financial operations and light debt burden. Total university enrollment grew to 21,619 in 2002, up 26% from 17,195 in 2000. Unlike most schools, NSU is principally a graduate institution, as its 4,700 undergraduates represented only 22% of the fall 2002 student body. Graduate enrollment for the same year was 16,917, up 30% from 2000. Enrollment at the Shepard Broad Law Center has remained stable despite the recent openings of three new law programs in Florida (Barry University and Florida International University in Miami and Florida A&M University in Orlando). Fall 2002 law school enrollment increased 5% to 1,012, from 963 in 2000.

NSU has consistently posted positive operating margins and strong debt service coverage due to sound budgeting and a growing enrollment. Fiscal 2002 unrestricted operating revenues were $294.3 million, while unrestricted operating expenses totaled $290.0 million. Coverage of maximum annual debt service (MADS) on parity and subordinate debt was 2.1 times (x). As further evidence of the university's manageable debt load, MADS on total outstanding debt was only 3.3% of fiscal 2002 unrestricted revenues.

NSU also enjoys a favorable relationship with Broward County. In 2001 the university opened a library that will serve as a public library and as a university facility. The university and the county have agreed that Broward County will pay between 40% to 50% of the annual operating expenses for the library, as well as approximately one half of annual debt service on the 2000B bonds used to finance construction of the library and an accompanying parking garage. The agreement between the university and the library is in effect for 30 years, though county funds are subject to annual appropriation by the county legislature.

Credit concerns center on the modest level of liquidity and on the high dependence on tuition related revenue. Available funds, which are defined as unrestricted and temporarily restricted cash and investments, totaled $63.2 million for fiscal 2002, and would cover slightly less than three months of fiscal 2002 unrestricted expenses. The modest level of liquidity, coupled with a relatively small endowment of $27 million, provides a limited cushion for unexpected financial shortfalls. Tuition income represented 79% of 2002 unrestricted revenues, making NSU's financial stability highly dependent on steady student demand. Fitch expects overall student demand trends to remain stable, as the number of Florida high school graduates is forecasted to surge over the next eight years.

NSU is an independent, co-educational school, with its principal campus located on a 232 acre campus in suburban Fort Lauderdale, Florida. Its current enrollment ranks it as the largest independent institution of higher education in the state.