TEXAS A&M SYSTEM 1992 PERMANENT UNIVERSITY FUND BONDS RATED 'AA+' BY FITCH -- FITCH FINANCIAL WIRE --
TEXAS A&M SYSTEM 1992 PERMANENT UNIVERSITY FUND BONDS RATED 'AA+'
BY FITCH -- FITCH FINANCIAL WIRE --
NEW YORK, Jan. 13 /PRNewswire/ -- The board of regents of the Texas A&M System's Permanent University Fund (PUF) Bonds $49.2 million Series
1992A and $45.5 million Series 1992B are rated "AA+" by Fitch. The credit trend is stable.
Proceeds of the Series 1992A bonds will be used to advance refund the system's Series 1988 PUF bonds, outstanding in the principal amount of $50 million. Proceeds of the Series B issue will be used to refund the system's PUF Subordinate Lien Variable Rate Notes, presently outstanding in the principal amount of $45 million.
The 1992 bonds are secured by a pledge of, and a first lien on, the Texas A&M System's share of income from the state's $3.9 billion PUF. By mandate of the state constitution, one third of the income from the Permanent University Fund is constitutionally appropriated to the Texas A&M system and the remaining two-thirds are appropriated to the University of Texas system.
In 1991, the Texas A&M system's share of PUF income amounted to over $90 million, providing a very strong 3.3x pro forma coverage of maximum annual debt service on all the system's outstanding PUF bonds. Constitutional provisions, keeping the corpus of the Permanent University Fund forever inviolate, and limiting total borrowing against PUF income by both the Texas A&M system and the University of Texas system to 30 percent of the book value of PUF assets, provide further security. Additional protection is provided by the additional bonds test, which requires that historical pro forma coverage of average annual debt service on all PUF bonds be at least 1.5x.
The Permanent University Fund has sustained a strong performance from the standpoint of capital appreciation and the generation of income to service debt and fund the portion of capital needs of the state's two largest public university systems. The market value of the PUF has grown to over $3.9 billion from $1 billion in 1978, despite the fact that the PUF must distribute all interest and dividend income to the A&M and UT systems and must rely primarily on capital gains for growth of the corpus.
Procedural safeguards and board-established policies provide for strong oversight of the PUF's performance. However, flexible investment policies, which provide management with the necessary latitude to grow the PUF on an inflation-adjusted basis, heighten the fund's exposure to market risk.
/CONTACT: Andy Matteis of Fitch, 212-908-0501/ CO: Texas A&M University ST: Texas IN: SU: RTG SH -- NY029 -- 9035 01/13/92 10:54 EST