Fitch Ratings Assigns 'BBB+' to Nova Southeastern University, FL.

Business Editors

NEW YORK--(BUSINESS WIRE)--Dec. 11, 2003

Fitch Ratings assigns its 'BBB+' rating on Broward County Educational Facilities Authority (BCEFA), FL. Educational Facilities Revenue bonds, series 2004A in the approximate amount of $25,775,000, series 2004B in the approximate amount of $38,515,000 and series 2004C in the approximate amount of $17,015,000. The bonds will be issued by BCEFA on behalf of Nova Southeastern University (NSU or the university). Fitch also affirms its 'BBB+' rating on NSU's $80,613,000 outstanding parity bonds issued by BCEFA as series 1994, series 2000B, and series 2002B. The Rating Outlook is Stable.

The bonds are expected to be sold early next year. The bonds will be sold through negotiation by SunTrust Capital Markets, Inc. The series 2004A and series 2004B bonds are expected to be issued as fixed rate bonds. The series 2004C bonds are expected to be issued as variable rate or auction rate debt and may be secured by a direct pay letter of credit.

Series 2004A bond proceeds will be used to advance refund outstanding series 1994 bonds. Series 2004B bond proceeds will be used to fund construction of a $35 million university center, to fund a reserve fund and to pay costs of issuance. Series 2004C bond proceeds will be used to finance the construction of a $12 million center in Orlando, to refund a $4.8 million promissory note for the purchase of land, and to pay costs of issuance.

The 'BBB+' rating is supported by the university's increasing enrollment, history of stable financial operations and modest debt burden. Total university enrollment grew to 23,428 for fall 2003, up 8.37% from the previous year. The average rate of growth since fall 1999 has been 7.92%. This enrollment growth is typical of other private and public colleges and universities in the state where the number of high school graduates has been growing and is expected to increase by 17% over the next eight years. Unlike the other colleges and universities in the state, NSU is principally a graduate institution. Only 22% of NSU's fall 2003 students were undergraduates. Enrollment at the Shepard Broad Law Center has remained stable despite the recent openings of three new law programs in Florida (Barry University and Florida International University in Miami and Florida A&M University in Orlando). Fall 2003 law school enrollment was 1,006.

NSU has consistently posted positive operating margins and sound debt service coverage due to sound budgeting and a growing enrollment. Fiscal 2003 unrestricted revenues were $328.1 million, while unrestricted operating expenses totaled $322.4 million. Coverage of maximum annual debt service (MADS) on parity and subordinate debt was 2.4 times (x). While the debt burden remains manageable, Fitch notes that debt outstanding with the issuance of the series 2004 debt will be more than double the debt outstanding since fiscal year 1999. The university does not plan to issue any additional debt after the series 2004 bonds for at least 12 months.

NSU also enjoys a favorable relationship with Broward County. In 2001 the university opened a library that serves as a public library and as a university facility. The university and the county have agreed that Broward County will pay between 40% to 50% of the annual operating expenses for the library, as well as approximately one half of annual debt service on the 2000B bonds used to finance construction of the library and an accompanying parking garage. The agreement between the university and the library is in effect for 30 years, though county funds are subject to annual appropriation by the county commission.

Credit concerns center on the low level of liquidity and on the high dependence on tuition related revenue. Available funds, which are defined as unrestricted and temporarily restricted cash and investments, totaled $62.1 million for fiscal year 2003, and would cover slightly over two months of fiscal 2003 unrestricted expenses. The limited liquidity provides little cushion for unexpected financial shortfalls. The lack of liquidity is a concern given the heavy dependency on tuition and fees which represented 79% of fiscal 2003 unrestricted revenues.

NSU is an independent, co-educational school, with its principal campus located on a 300 acre campus in suburban Fort Lauderdale, Florida. Its current enrollment ranks it as the tenth largest independent institution of higher education in the country.