NEW YORK - (Business Wire) Fitch Ratings assigns an 'A+' underlying rating to the following series of higher education facility revenue and revenue refunding bonds issued by the Rhode Island Health and Educational Building Corporation on behalf of the Rhode Island School of Design (RISD):
-- $61.995 million series 2008A;
-- $31.87 million series 2008B
The series 2008A and 2008B bonds are expected to price on a negotiated basis on or about March 25, 2008. The bonds, which will be issued as variable-rate demand obligations, will be rated by Fitch nearer to closing based upon an irrevocable, direct pay letter of credit to be provided by Bank of America, N.A. Proceeds of the bonds will refund approximately $93 million of outstanding insured auction rate bonds. The Rating Outlook is Stable.
RISD plans to plans to synthetically fix the interest rate on the bonds by amending outstanding fixed payor swaps with UBS AG, the swap counterparty. Outstanding swaps contain standard risk mitigants including collateral posting requirements in the case of credit deterioration, among others. Fitch reviewed the proposed amendments to the swaps and they appear to be standard.
The underlying 'A+' rating reflects RISD's premier reputation as one of the nation's leading colleges of art and design; strong demand and highly selective admissions; sound levels of liquidity resulting from strong investment returns and increased institutional development activity; and minimal future capital needs, coupled with no additional debt plans. Offsetting these strengths is the historical variability of RISD's operating performance; a significant budgetary reliance on student generated sources, though this risk is offset by enrollment stability over time; and an above-average debt burden.
RISD's market-leading competitive position enables the institution to easily achieve its annual enrollment goal. Since fiscal 2003, undergraduate headcount has been at or about 1,900 students, while the admissions process has become increasingly more stringent. Enrollment stability is important at RISD as student-generated sources provide the lion's share of budget support. Despite operating performance which has been somewhat variable over the past several years, RISD's balance sheet resources continue to increase. Under the most conservative assumptions regarding liquidity, fiscal 2007 available funds equaled a strong 177.9% of operating expenses and 100.2% of debt. Both metrics compare favorably with their respective 'A' category median of 83% for available funds to operating expenses and 90% for available funds to debt. RISD's debt burden is somewhat high for the rating category; however, no additional leverage is expected. The successful completion of a recent capital campaign has helped raise the visibility of RISD among various constituencies and will likely serve as the foundation for additional fundraising in support of future infrastructure and programmatic needs.
Founded in 1877, RISD is today a private, non-profit corporation providing education in visual arts, design, architecture, and art education. Its contemporary mission centers principally on art education and exhibition, with its programs, faculty, facilities, and collection recognized worldwide. RISD's 1.5 million gross square foot campus is located in Providence, Rhode Island.
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Fitch Ratings
Douglas J. Kilcommons, +1-212-908-0740 (New York)
Media Relations:
Cindy Stoller, +1-212-908-0526 (New York)
