Fitch Downgrades University of Tampa, Florida Rev Bonds to 'BBB'.

NEW YORK -- Fitch has assigned a 'BBB' rating on approximately $45 million of the city of Tampa, Florida revenue bonds (University of Tampa Project), series 2006, issued on behalf of the University of Tampa (UT). In addition, Fitch lowers its underlying rating to 'BBB' from 'BBB+' on the outstanding series 2002 parity bonds. The Rating Outlook is Stable.

The series 2006 bonds will be issued as fixed-rate bonds and are expected to sell on or about April 26 via negotiation with Wachovia Securities. Bond proceeds will be used to construct a 448-bed residence hall and the second phase of a 700-space parking garage, and to pay costs of issuance.

The primary credit concern and reason for the rating downgrade is the UT's increasingly high debt burden. Maximum annual debt service (MADS), including the series 2006 bonds, is projected to be $7.5 million. Projected MADS would consume 9.9% of fiscal 2005 revenues. Although revenues will increase with the completion of the residence hall to be constructed with the series 2006 bond proceeds, the debt burden is expected to remain high. Fitch considers a ratio of MADS to revenues of 10% as high. The median for private universities rated in the 'BBB' category is 4.9% with a range of 3% to 7.6%. When capital leases and a contingent liability are added, MADS would consume 13.6% of fiscal 2005 unrestricted revenues. With approximately 94% of unrestricted revenues being derived from student-generated revenues, which include tuition, fees and auxiliary revenues, any significant or prolonged decline in enrollment could adversely affect the university's ability to repay the debt if operating expenses could not be reduced to offset the decline in revenues. Furthermore, UT's liquidity levels are limited and would provide little cushion in the event of a revenue decline.

The 'BBB' rating is based on UT's credit strengths including growing enrollment, positive financial operations and strong demand for student housing. Enrollment for fall 2005 was 5,125 students, reflecting growth of 34% since fall 2001. As enrollment continues to increase, the need for additional housing has become critical. The new dormitory to be financed with the series 2006 bond proceeds will provide approximately 448 beds to address the current housing shortage and to handle future enrollment growth. Enrollment growth has contributed to the consistent and positive operating performance of the university as demonstrated by a positive operating margin for the last four years. The operating margin for fiscal 2005 was 2.8%.

Founded in 1930, UT is located on 80 acres in downtown Tampa. Approximately 48% of its students are from the state of Florida.

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