November 5, 2012 / 6:26 PM / 5 years ago

TEXT-Fitch rates Vanderbilt University, Tenn. revs 'AA+'

Nov 5 - Fitch Ratings assigns an 'AA+' rating to the following series of
bonds issued by the Nashville & Davidson County Metropolitan Government Health &
Educational Facilities Board on behalf of Vanderbilt University (Vanderbilt):

--$100.2 million revenue refunding bonds, series 2012D;
--$44.4 million revenue refunding bonds, series 2012E.

The bonds are expected to sell via negotiation the week of Nov. 12. Bond
proceeds will be used to refund outstanding variable-rate demand bonds (VRDBs)
and commercial paper (CP) notes. In addition, Fitch affirms Vanderbilt's various
long- and short-term ratings as detailed at the end of this release.

The Rating Outlook is Stable.


Revenue bonds, CP, and taxable notes are a general obligation of the university,
payable from all legally available funds.


STABLE CREDIT CHARACTERISTICS: Vanderbilt's steady, positive operating results;
substantial balance sheet resources; manageable debt burden and strong
fundraising ability underpin the 'AA+' rating. Counterbalancing factors include
revenue concentration in the health care sector and elevated competition as the
university increasingly competes with top-tier universities nationwide.

STRONG DEMAND PROFILE: A strong reputation in academics, research and clinical
patient care are the basis for the university's consistently strong student
demand and highly selective admissions at both the undergraduate and graduate

REVENUE CONCENTRATION: Healthcare services provided by Vanderbilt University
Medical Center (VUMC), which is part of the university's primary reporting
entity and consolidated within its audited financial statements, contribute
two-thirds of total unrestricted operating revenues. Vanderbilt's limited
funding diversity is partially mitigated by the consistently positive operating
performance of VUMC's hospitals and clinics.

CAPABLE MANAGEMENT TEAM: Vanderbilt's stable, seasoned management team
demonstrates prudent financial and facilities planning that has resulted in
manageable future capital needs and a stable to declining debt burden.

RESOURCE SUFFICIENCY: The 'F1+' rating is based on Vanderbilt's ability to cover
the maximum potential liquidity demands presented by its variable rate debt
programs by at least 1.25 times (x) from internal resources. Such resources
include cash, highly liquid, highly rated investments, and dedicated liquidity


Vanderbilt's strong financial profile is supported by substantial balance sheet
resources. Available funds, defined as cash and investments not permanently
restricted, totaled $3.72 billion as of June 30, 2012 and covered fiscal 2012
operating expenses ($3.51 billion) and debt ($1.56 billion) by a solid 106% and
239%, respectively. The university's steady operating performance provides
further financial flexibility, generating a solid 4.3% operating margin in
fiscal 2012 (including endowment distributions), exceeding the 2.8% average of
the prior five fiscal years (2007-2011). Revenue derived from the operations of
VUMC represents two-thirds of the university's total operations, reflecting its
limited funding diversity. However, concern over this revenue concentration is
partially mitigated by the continued growth and consistently strong operating
performance of VUMC's hospitals and clinics.

Typical of similarly rated institutions, Vanderbilt utilized variable-rate debt
and derivative instruments, in addition to bullet maturities for certain issues.
Fitch believes the university maintains sufficient financial resources and
management sophistication to address the risks attendant to these debt
structures. Moreover, it has been shifting to a more conservative debt profile
recently via refunding variable-rate debt and terminating certain interest rate

Vanderbilt's debt burden remains manageable. While maximum annual debt service
(MADS; $382 million) represents a high 10.4% of fiscal 2012 revenues, it
includes a $250 million bullet due in fiscal 2019 on the university's taxable
series 2009A bonds. Amortizing this bullet payment over the life of the bonds,
the debt burden is closer to 5%, which Fitch views as moderate. As indicated by
its 'AA+' rating, Fitch expects Vanderbilt will maintain strong market access to
manage large bullet maturities and mandatory tenders.

The 'F1+' rating is based on the availability of highly liquid, highly rated
securities to cover potential maximum liquidity demands presented by
Vanderbilt's outstanding VRDBs and CP notes. Of its substantial cash and
investments, about $957.6 million, including cash, cash equivalents, and U.S.
government and agency debt (after Fitch discounts based on maturity), was
available on a same or next-day basis on Sept. 30, 2012. To supplement internal
liquidity sources, the university maintains the ability to draw on dedicated
lines of credit in the aggregate amount of $200 million.

On a combined basis, Vanderbilt's liquid assets totaled $1.16 billion and
covered its liquidity needs of $796.3 million by a sound 1.45x. This includes
$121.3 million of outstanding VRDBs (being refunded with the series 2012D bonds)
and maximum CP authorization of $675 million ($264.2 million currently
outstanding; $50 million to be refunded with the series 2012E bonds). To reduce
potential demands on its liquidity, the university limits the amount of CP notes
that can mature on a given day to $50 million. For an 'F1+' rating, Fitch
typically expects coverage of at least 1.25x. Vanderbilt's procedures for
handling a failed remarketing of VRDBs and/or rollover of CP are highly detailed
and regularly updated, reflecting favorably on management.

Vanderbilt is a private comprehensive university and medical center located in
Nashville, TN. The university consists of 10 schools and colleges, and the
medical center consists of the School of Medicine, the School of Nursing, the
Vanderbilt Medical Group and the hospitals and clinics. The university's fall
2012 freshman acceptance rate was an impressive 14.2%, with a solid 40% of
accepted students choosing to enroll. Fall 2012 headcount of 12,710 represents a
7.3% increase since fall 2007.

Fitch affirms the following ratings:

--$569.1 million revenue bonds at 'AA+';
--$119.6 million VRDBs at 'AA+/F1+';
--$67 million floating rate notes (three-year put structure), series 2012A at
--$67 million floating rate notes (five-year put structure), series 2012B at
--$250 million taxable notes, series 2009A at 'AA+';
--$675 million taxable and tax-exempt CP program at 'F1+'.

Additional information is available at ''. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Revenue-Supported Rating Criteria' (June 12, 2012);
--'U.S. College and University Rating Criteria' (May 24, 2012);
--'Criteria for Assigning Short-Term Ratings Based on Internal Liquidity' (June
15, 2012);
--'Vanderbilt University, Tennessee' (March 13, 2012);
--'Fitch Rates Vanderbilt University's (TN) Series 2012 Rfdg Revs 'AA+'; Outlook
Stable' (March 6, 2012).

Applicable Criteria and Related Research:
Revenue-Supported Rating Criteria
U.S. College and University Rating Criteria
Criteria for Assigning Short-Term Ratings Based on Internal Liquidity
Vanderbilt University, Tennessee

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