Fitch Rates Texas A&M University System 2010A&B RFS Bonds 'AA+'; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings assigns an 'AA+' rating to the following Board of Regents of the
Texas A&M University System (TAMUS) revenue bonds:

--$65,355,000 revenue financing system (RFS) bonds, series 2010A;

--$125,855,000 RFS bonds, series 2010B.

In addition, Fitch affirms the 'AA+' rating on TAMUS's approximately $1.5
billion of outstanding parity RFS bonds and the 'F1+' rating on TAMUS's
tax-exempt commercial paper (CP) program authorized for a maximum amount of $300
million. Approximately $12.6 million of CP notes are currently outstanding under
the CP program, which TAMUS uses as a source of interim financing for capital
projects.

The Rating Outlook is Stable.

The bonds are expected to sell on or about the week of May 31, 2010 via
negotiation. Proceeds of the bonds will fund various capital improvement
projects and bond issuance costs. Two series of refunding bonds may sell
concurrently with or shortly before the series 2010A&B bonds, pending market
conditions.

RATING RATIONALE:

--TAMUS's history of strong operating results and fairly conservative investment
management practices underpins its significant liquidity levels.

--The system is somewhat vulnerable to reductions in operating support from the
'AA+' rated state of Texas; other revenue streams - including student-generated
fees, sponsored research, and income generated by the system's constitutionally
defined beneficiary interest in a portion of the permanent university fund (PUF)
- provide important funding diversity.

--Strong student demand, evidenced by sound annual enrollment growth, should
benefit the system's revenue base.

--Management's long track record of prudently implementing a large, multiphase,
multi-campus capital improvement plan (CIP) offsets concerns regarding the
system's ongoing use of financial leverage to fund various CIP projects.

--The 'F1+' rating on the CP program is based upon the immediate availability of
high quality, liquid resources to support a failed roll-over of maturing CP
notes under TAMUS's CP program.

KEY RATING DRIVERS:

--Maintenance of operating performance and levels of available funds at or near
current levels.

--Timely action on the part of management in response to potential state funding
reductions.

--Issuance of additional debt in support of the CIP commensurate with the level
of resources available for its repayment.

SECURITY:

RFS debt is secured by pledged revenues which essentially include legally
available, unencumbered funds and balances of TAMUS. As of Aug. 31, 2009, monies
pledged to RFS debt totaled approximately $2.4 billion.

CREDIT SUMMARY:

TAMUS's consistently positive operating performance benefits its healthy balance
sheet. The system's operating margin has averaged a strong 5.9% annually since
fiscal 2005, including an 8.9% result in fiscal 2009. Fiscal 2009 available
funds, or cash and investments that are not permanently restricted, totaled $2.1
billion, representing a sound 67% of operating expenses and 92% of total pro
forma debt, including borrowings under TAMUS's RFS and PUF bond programs.

In the current biennium, the state legislature appropriated $1.1 billion to
TAMUS for fiscal 2010 and $1 billion for fiscal 2011. However, the state
recently announced appropriation levels for both fiscal 2010 and fiscal 2011
could be reduced by up to 5.0% ($91.7 million), due to broader economic
weakness. These funds have already been deposited by TAMUS in a lock-box held by
the state treasurer. State appropriations, which continue to represent TAMUS's
largest revenue source, may face additional pressure during the next biennium
(fiscal years 2012-2013) if the state's finances fail to recover. Fitch believes
that TAMUS's historically strong operating margin and liquidity position, as
well as its experienced management team, position it well to manage a period of
uncertain state funding.

Maximum annual debt service, including the series 2010A&B bonds, represents
approximately 4.7% of fiscal 2009 revenues. While somewhat higher than what is
typical of an 'AA+' public university, Fitch recognizes the strength of the RFS
revenue pledge and TAMUS's ability to service debt obligations from annual
operations rather than available fund balances. In addition, approximately 37%
of TAMUS's RFS portfolio is classified as non self-supporting tuition revenue
bonds (TRB), which is eligible for an additional appropriation equal to TRB debt
service from the state. As has been the case historically, Fitch expects that
management will continue to size and time the implementation of capital
improvement projects and related financings to levels of available resources.

Headquartered in College Station, TAMUS maintains a large presence across the
State of Texas. The system consists of 11 state-supported academic institutions,
seven research and service agencies, and a health sciences center. Over the past
five fall semesters, headcount enrollment has increased at an average annual
growth rate of 3.2% to 114,277 in fall 2009. Demand trends - measured by
applications, acceptances, and matriculations - are expected to remain quite
strong in fall 2010, providing TAMUS with a degree of admissions flexibility.

Applicable criteria available on Fitch's web site at 'www.fitchratings.com'
include:

--'Revenue-Supported Rating Criteria', dated Dec. 29, 2009.

--'College and University Rating Criteria', dated Dec. 29, 2009.

Additional information is available at www.fitchratings.com.

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Fitch Ratings
Douglas J. Kilcommons, +1-212-908-0740
Colin Walsh, +1-212-908-0767
Cindy Stoller, +1-212-908-0526 (Media Relations)
cindy.stoller@fitchratings.com

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