Fitch Rates Montclair State University (New Jersey) Revs 'A'.

NEW YORK -- Fitch assigns an 'A' rating to the New Jersey Educational Facilities Authority Refunding Revenue Bonds (Montclair State University), series 2006J in the approximate amount of $90 million and the series 2007A bonds in the approximate amount of $7 million. The series 2007A bonds are expected to be delivered in April 2007. Fitch also affirms the 'A' rating on Montclair State University's (MSU) outstanding parity bonds listed below. The series 2006J and 2007A bonds are expected to be sold during the month of November or early December through negotiation led by Lehman Brothers. The bonds are expected to be insured by MBIA. The Rating Outlook is Stable.

The series 2006J bond proceeds will be used to refund a portion of the university's outstanding bonds which may include maturities from the series 1997D, 2001F, 2002F, 2003L and 2007A. The series 2007A bond proceeds will be used to refund the outstanding series 1997E bonds.

The 'A' rating is primarily supported by MSU's positive operating performance, enrollment growth and experienced management team. The operating margin for fiscal 2006 was 3.6% and has consistently been positive over the last five years. The university's ability to generate positive operating performance is largely attributed to enrollment growth. Fall 2006 headcount enrollment of 16,076 reflects 9.6% growth since fall 2002. The university has a goal to increase enrollment to 18,000. To achieve the goal, management's initiatives include increased program offerings, updated student housing and enhanced marketing efforts toward graduate students.

The primary credit concern is MSU's high pro forma debt burden when compared to Fitch's medians for public universities. However, it should be noted that the debt burden is consistent with other public universities in the state. Debt has doubled since fiscal 2003. Maximum annual debt service (MADS) of $25.2 million would consume 10.5% of fiscal 2006's revenues. In addition, MSU has identified $77 million of possible future debt issuance if state funding cannot be secured. While state funding for capital improvements has historically been limited, funding for operations represents a significant funding source. For fiscal 2006, state appropriations for operations represented 32.1% of MSU's revenues. Fitch rates the general obligation debt of the state 'AA-'. Any significant decrease in state funding could have a negative impact on the university's finances.

Montclair State University was founded in 1908 as a two year Normal School. The University is located in Montclair, New Jersey.

Outstanding Issues:

--New Jersey Educational Facilities Authority Refunding Revenue Bonds (Montclair State University) series 1972B, 1974D, 1997D, 1997E, 2001F, 2002F, 2003E, 2003L, 2006A and 2006B.

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