Fitch Rts Midwestern State University Rev Bnds --Texas-- 'A+'.

Business Editors

AUSTIN, Texas--(BUSINESS WIRE)--June 10, 2002

The Texas Public Finance Authority Midwestern State University's (MSU) $8,965,000 revenue financing system revenue bonds, series 2002 are rated 'A+' by Fitch Ratings. The bonds are scheduled for a competitive sale on June 18. In addition, Fitch assigns an 'A+' rating to MSU's outstanding revenue financing system revenue bonds, series 1998 parity bonds in the amount of $8,125,000. Fitch also assigns an 'A+' rating to MSU's outstanding prior encumbered building revenue and refunding bonds, series 1996 in the amount of $4,645,000. The Rating Outlook is Stable.

Bond proceeds will be used to fund various campus projects including heating, ventilating, and air conditioning systems; chilled water distribution; street drainage and paving and other projects and pay cost of issuance. The bonds are secured by pledged revenues of MSU and include all legally available revenues and funds balances. Generally, the pledge excludes state-appropriated funds. For fiscal 2001, pledged revenues, including fund balances, were $28.9 million. Although not legally obligated, the state is expected to reimburse MSU for debt service on the bonds through a biennial appropriation. However, no assurance can be given that the full amount will be appropriated throughout the life of the bonds.

The long-term 'A+' rating reflects MSU's positive financial operations, consistent state support, and modestly growing enrollment. MSU has experienced a positive operating margin for each of the past five years ranging from a low of 5.8% to a high of 12.9%. Contributing to the financial strength of university is the significant support from the state in the form of state appropriations for operations and facility needs. Appropriations from the state's general fund represented 41.8% of MSU's fiscal 2001 unrestricted current fund (UCF) revenues. In addition, MSU received an additional $3 million, or approximately 6% of UCF revenues, from the Higher Education Assistance Fund, (HEAF), a fund established by the constitution which provides funding for ten year periods for both operations and debt service payments for HEAF debt issued for academic buildings and infrastructure. Fitch rates the state of Texas 'AA+'. The level of state appropriations as a percentage of the total budget has declined over time while tuition dependency has increased, which is favorable. Liquidity position is another positive credit factor. Available funds, defined as unrestricted cash and investments and debt service reserve funds, for fiscal 2001 were $21.5 million and would be sufficient to cover 49% of that year's UCF expenses and mandatory transfers. MSU's liquidity is stronger than most public universities rated in the 'A' category. In addition, MSU's enrollment has recorded modest annual growth; full-time equivalents have increased 5.5% since 1995.

The primary credit concerns are MSU's relatively high tuition discount rate as compared to other public universities. For fiscal 2001, the rate stood at 26%, although the rate is down from 29% in 1997. The university attributes the high rate to waivers for military personnel from Sheppard Air Force Base enrolled at MSU as well as the effects of a tuition reciprocity agreement with nearby southern Oklahoma counties. Officials report that the university is examining its exemptions and waiver policies. In addition, while MSU's debt load is moderate with pro forma maximum annual bonded debt service projected to consume approximately 4% of fiscal 2001 UCF revenues, the university's long-term master plan and strategic plan have not been finalized. These plans are expected to identify the university's major capital needs. However, it appears that capital requirements are manageable and include the renovation of two dormitories ($4 million to $5 million) as well as the construction of a new building for the business school, which is anticipated to be financed from a portion of MSU's HEAF appropriation and private donors. The university is also undertaking a $14 million to $17 million off-balance financing with a developer for additional housing to relieve overcrowding and provide some construction and financing flexibility.

MSU originated in 1922 as Wichita Falls Junior College, the first municipal college in Texas. Located in Wichita Falls near the Oklahoma border, the university is about 120 miles northwest of the Dallas/Fort Worth metroplex. The university offers undergraduate and graduate degrees from six colleges. Approximately 87% of the students are from Texas, with the balance coming from 44 states and 59 countries.