Fitch Rates UMass Bldg Auth $153MM Bonds 'A+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--July 22, 2003

Fitch Ratings assigns the underlying rating of 'A+' to the University of Massachusetts (UMass) Building Authority's approximately $153 million project and refunding revenue bonds, senior series 2003-1. Fitch also affirms the underlying rating of 'A+' on approximately $400 million of outstanding UMass obligations listed below. The Rating Outlook remains Stable. The series 2003-1 bonds, expected to be insured, are to sell via negotiation with a syndicate led by Citigroup on or about July 28. UMass is a public university system serving about 60,000 students, primarily residents of Massachusetts, at a flagship campus in Amherst, as well as other campuses in Boston, Dartmouth, Lowell, and Worcester, MA.

Credit strengths include a track record of strong operating margins, moderate liquidity levels, stable student demand, and growing research and fundraising returns. Credit concerns continue to include the rising debt burden, a significant capital program, and the possible effects on student demand resulting from likely, ongoing fee increases and declining state appropriations for operations and facilities.

UMass management has responded prudently with both revenue and expenditure measures in an attempt to preserve balance despite significant cuts in state appropriations during the last two years. These actions, along with fairly stable enrollments despite rising student fees, are the basis for the Stable Rating Outlook. Following a decade of strong growth in state funding, state operating appropriations were cut more than 12% between fiscal years 2001 and 2003. In fiscal 2004, an additional cut of more than 18% is expected. UMass officials report that approximately half of the cuts have been absorbed through expenditure management, including a small number of layoffs, with the other half funded through fee increases.

At the system's flagship Amherst campus, mandatory fees and tuition for an in-state undergraduate have grown from $5,212 in fiscal year 2001 to an expected $7,482 for fiscal year 2004, a total increase of more than 43% in three years. Despite the rising fees, full-time equivalent enrollment for all campuses has remained fairly stable, declining just slightly in fall 2002 to 46,759 (down 0.1%) due primarily to a planned downsizing of UMass Amherst's freshman class.

As has been reported in the press, this $153 million bond issuance follows the postponement of a projected bond issuance of more than $350 million earlier this year. Funding of UMass Boston's first student residences is excluded from this smaller bond issuance. The governor's plan to reorganize the state's higher education system, as well as eliminate the office of UMass president, failed to pass this year. UMass trustees approved a five-year $1.2 billion capital plan in 2002, which is now constrained by smaller expected contributions from the state and a larger need for fundraising and external support.

Affirmed are Fitch's 'A+' underlying ratings for the following issues:

-- Massachusetts Health and Educational Facilities Authority

(MHEFA) revenue bonds (UMass issue), series B& C (insured:

FGIC);

-- MHEFA revenue bonds, Worcester City Campus Corp. (WCCC) issues

(UMass projects), series A and B (insured: FGIC);

-- MHEFA revenue bonds, WCCC issues (UMass projects), series C

(insured: MBIA);

-- UMass Building Authority (UMBA) project revenue bonds, series

2000-2 (insured: Ambac).

Certain other 'commonwealth-guaranteed' UMBA obligations carry an underlying 'AA-' rating by Fitch-based on the credit of the Commonwealth of Massachusetts, rather than the credit of UMass.