Fitch Affirms UMass Building Authority's 2005-1 Revs At 'A+'.

NEW YORK -- Fitch Ratings affirms the underlying 'A+' rating on $25,595,000 University of Massachusetts Building Authority (UMass) refunding revenue bonds, senior series 2005-1. The bonds are insured by AMBAC. Fitch also affirms the underlying 'A+/F1+' ratings on outstanding bonds based on UMass' credit and the underlying 'AA-' ratings on outstanding bonds that are guaranteed by the Commonwealth of Massachusetts. All of the rated bonds and their respective ratings are listed below. The Rating Outlook remains Stable for the 'A+' rated securities.

The series 2005-1 bonds will be delivered on or about Feb. 3. Fitch assigned the 'A+' rating on May 6, 2004. The bonds were sold shortly thereafter with delayed settlement scheduled for Feb. 3. Bond proceeds will be used to redeem all outstanding taxable refunding revenue bonds series 2004-2 issued by the authority.

UMass's credit strengths include its stable student demand, positive operating performance, and growing research and fundraising efforts. Credit concerns include modest liquidity, a rising debt burden, a significant capital program, and the effects of continuing fee increases on student demand. Student headcount enrollment has declined by 2% over the past two years to 56,601 for fall 2004. During this period, average annual undergraduate resident tuition increased by 40%-50% at the various campuses. Tuition and fees represented 21.4% of fiscal 2004 revenues. Any significant decrease in enrollment could have a negative effect on both revenues and the rating.

Over fiscal years 2002-2004, UMass experienced significant state appropriation cuts. However, with fee increases and expenditure reductions, operating margins remained near or better than break-even. For fiscal 2004, the operating margin was 6%. State appropriations were 23.6% of revenues in fiscal 2004 and were the largest single source of revenues. After three years of funding cuts, state appropriations for fiscal 2005 are 7.3% higher than the previous fiscal year. A return to stable funding from the state is critical to the rating given the university's modest level of liquidity. Fitch estimates that the university had enough liquidity to cover 21.2% or slightly over two months of fiscal 2004 expenses. The Fitch liquidity median for an 'A' rated public university is 37.1%.

The 'AA-' rating on the commonwealth guaranteed bonds is the same as that of Massachusetts general obligation bonds. No more than $200 million of such bonds may be outstanding, exclusive of bonds and notes previously refunded or to be refunded. Total bonds outstanding under the authorization are $194.5 million. For more information on the state's credit, see Fitch's most recent report, dated Oct. 28, 2004, and available on the Fitch Ratings web site at 'www.fitchratings.com'.

The underlying rating of 'A+' is affirmed by Fitch for the following bonds:

--$113,620,000 project and refunding revenue bonds, senior series 2000-2; (insured: Ambac);

--$137,970,000 project and refunding revenue bonds, senior series 2003-1; (insured: Ambac);

--$183,965,000 project and refunding revenue bonds, senior series 2004-1; (insured: Ambac).

Fitch also affirms the 'F1+' rating for the following bonds:

$25,875,000 taxable refunding revenue bonds, senior series 2004-2 (these bonds will be refunded with proceeds from the series 2005-1 bonds).

The 'A+' rating is being withdrawn for the following bonds that were assigned a rating on May 6, 2004 but were not issued by the authority:

--Refunding revenue bonds, senior series 2005-2 (delayed delivery);

--Facilities refunding revenue bonds, senior series 2004-B.

The underlying rating of 'AA-' is affirmed for the following revenue bonds issued by the authority and guaranteed by the commonwealth:

--$15,170,000 series 1995 fifth series A;

--$23,370,000 series 1995-B;

--$45,830,000 series 2000-A (partially insured by MBIA);

--$14,065,000 series 2000-1;

--$96,025,000 series 2004-A (insured by MBIA).

The underlying rating of 'A+' is affirmed for the following revenue bonds issued by the Massachusetts Health and Educational Facilities Authority for the University of Massachusetts:

--$11,570,000 series 2001B (insured: FGIC);

--$35,000,000 series 2002C (insured: FGIC);

--$96,705,000 Worcester City Campus Corp. issues, series 2000A (insured: FGIC);

--$50,505,000 Worcester City Campus Corp. issues, series 2001B (insured: FGIC);

--$68,830,000 Worcester City Campus Corp. issues, series 2002C (insured: MBIA).

The 'AA+/F1+' ratings are affirmed for the following variable-rate bonds issued by the Massachusetts Health and Educational Facilities Authority for the University of Massachusetts. The bonds are supported by an irrevocable letter of credit (LOC) from Dexia Credit Local and the rating is based on the LOC:

--$40,000,000 variable rate demand revenue bonds, series 2000A.