Fitch Ratings Affirms College of the Holy Cross at 'AA-'.

NEW YORK -- Fitch Ratings affirms the 'AA-' rating on $30 million Massachusetts Development Finance Agency revenue bonds, College of the Holy Cross, 2002 issue periodic auction reset securities, issued on behalf of College of the Holy Cross (Holy Cross). Effective Aug. 1, the bonds will be converted to a fixed-rate mode. The remarketing agent is Goldman, Sachs & Co. Holy Cross also has approximately $96.6 million of bonds outstanding that were issued by the Massachusetts Industrial Finance Agency that are not rated by Fitch Ratings.

The 'AA-' rating and Stable Outlook are based on Holy Cross's substantial liquidity, positive operating performance, and experienced, professional management. Headcount enrollment for fall 2004 of 2,745 is 2% less than that of fall 2002. Even though enrollment has declined slightly, Holy Cross's financial strength has continued to improve. Liquidity, as measured by unrestricted and temporarily restricted cash and investments, continues to be substantial at $365.1 million for fiscal 2004, compared with unrestricted expenses of $108.8 million and outstanding debt of $127.7 million. For the three fiscal years 2002-2004, the operating margins were positive when the full amount of the endowment distribution is included as an operating revenue. For fiscal 2005, which ended June 30, the college expects the financial performance to be similar to that of the prior year. Fitch believes that the financial strength and stability of Holy Cross is largely due to the experienced management team coupled with integrated, comprehensive planning that provides a framework for adjusting in a timely manner to changes in economic conditions, student demand, and facility needs.

The major concern is a significant debt burden. Maximum annual debt service (MADS) would represent a use of approximately 7.9% of fiscal 2004 unrestricted revenues. Two of the university's bond issues, series 1998 and 2002, have bullet maturities. The series 1998 bonds have a bullet maturity of $31.3 million in 2024, and the series 2002 bonds have a bullet maturity in 2032. The college expects to annually generate sufficient cash flow that would provide for full payment of the bullet maturities. In March 2006, the college will issue bonds for the purpose of refunding on a current basis the entire principal amount outstanding of the series 1996 bonds, approximately $65.3 million. At the same time, the college may issue additional bonds for capital projects. A significant increase in debt in March 2006 without an offsetting plan for additional fundraising could negatively affect the rating. With approximately 72% of unrestricted revenues being derived from tuition and fees, any significant decline in enrollment could impact the college's ability to repay the debt if operating expenses could not be reduced to offset the decline in revenues.

Founded in 1843 as a Jesuit college, Holy Cross is located on 174 acres in Worcester and is for undergraduates only. Approximately 36% of its students are from the State of Massachusetts and nearly 83% live on campus. Holy Cross's endowment at the end of fiscal 2004 was $419.2 million, and the college currently has a $175 million capital campaign under way. To date, approximately $163 million has been raised.

Fitch's rating definitions are available on the agency's public web site, www.fitchratings.com. Published ratings, criteria and methodologies, and relevant policies and procedures are also available from this site, at all times. This document will remain on the public site for seven days.