Fitch Affirms 'BBB+' Rating on Webster University, MO.

Business Editors

NEW YORK--(BUSINESS WIRE)--Dec. 19, 2003

Fitch Ratings affirms its 'BBB+' on $35 million State of Missouri Health and Educational Facilities Authority (Webster University) revenue bonds, series 2001. The Rating Outlook is Stable.

The 'BBB+' rating is based on Webster's increasing and diverse enrollment that serves a unique niche, positive operating performance and financial flexibility achieved through the leasing of facilities and a predominately non-tenured faculty. Full time equivalent (FTE) enrollment for fall 2002 was 15,884 students. Fitch first rated Webster University in February 2001. At the time, fall 2000 FTEs were 11,346. The enrollment is diversified both geographically and between undergraduate and graduate students. Webster University has campuses in 17 states and seven international campuses.

Operating performance has continued to be positive with an operating margin of 8.7% for fiscal year 2003 which follows margins of 6.9% in fiscal 2001 and 10.9% in fiscal 2002. Financial flexibility is reflected by the university's use of leased facilities with short to mid-term leases to accommodate changes in enrollment. In addition, 57% of Webster's full time faculty have contracts for employment that undergo a periodic review versus tenure contracts.

The debt burden is manageable with maximum annual debt service (MADS) representing 2.7% of fiscal 2003 unrestricted revenues. In determining MADS and debt outstanding, Fitch included $1.2 million of debt service on $15.7 million of bonds and notes that were issued for capital improvements, however, the repayment of this debt is not on parity with the series 2001 bonds. Webster's balance sheet is expected to be stronger given the recent completion of the university's largest fundraising campaign which raised $44 million and the implementation of a lender program for graduate student loans, which may generate over $3 million per year in net revenues.

Concerns include the significant reliance on tuition income and increasing competition for non-traditional students. Tuition and fees represent approximately 90% of fiscal 2003 unrestricted revenues, reflecting the university's heavy dependence on enrollment and is high compared to other private universities. Webster has been a leader in offering on-line graduate programs to non-traditional students but many universities are also pursuing similar programs which may affect Webster's ability to attract students. However, to date, Webster's enrollment has continued to grow at double digit rates.

Webster University is an international, multi-campus university with its main campus in St. Louis, MO. It offers degree programs at metropolitan and military centers in 17 states throughout the U.S. and at seven international campuses. Approximately 27% of its enrollment is at military sites and about 70% of the students are enrolled in graduate programs.