9/2/2015
Press Release
Fitch Affirms Stephen F. Austin State University, Texas' RFS Bonds
at 'AA-'; Outlook Stable
Fitch Ratings-New York-02 September 2015: Fitch Ratings has affirmed the 'AA-' ratings on the following
bonds:
--$20.3 million Board of Regents of Stephen F. Austin State University Revenue Financing System,
revenue refunding bonds;
--$62.4 million Texas Public Finance Authority, Stephen F. Austin State University Revenue Financing
System revenue bonds.
The Rating Outlook is Stable.
SECURITY
The bonds are secured by all legally available revenues and fund balances of Stephen F. Austin State
University (SFA).
KEY RATING DRIVERS
STABLE CREDIT CHARACTERISTICS: The 'AA-' rating reflects a track-record of positive GAAP-based
operating performance and satisfactory balance sheet liquidity. SFA has a moderately high but
manageable debt burden.
CONSISTENTLY POSITIVE OPERATIONS: SFA managed well through a period of reduced
appropriations and stressed enrollment. Fitch expects positive operating trends to continue following
passage of a supportive state budget and stabilized enrollment.
STABLE ENROLLMENT: Enrollment stabilized as expected in fall 2014 after SFA's tightening of admission
standards in fall 2012 caused moderate declines. SFA expects incremental growth over the next few
years.
MODERATELY HIGH DEBT BURDEN: SFA's debt burden is moderately high, with maximum annual debt
service (MADS) consuming 8.3% of fiscal 2014 operating revenues. However, this is manageable due to
SFA's conservative debt structure, good coverage from operations, and significant state support for debt
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service.
RATING SENSITIVITIES
OPERATING TRENDS: The rating assumes that Stephen F. Austin State University will maintain balanced
operations and generally stable enrollment. Material weakening of operating trends could reduce debt
service coverage and place downward pressure on the rating.
CREDIT PROFILE
SFA is located in Nacogdoches, TX and was established in 1923 as a college for teacher training. Today,
it has six colleges offering approximately 80 undergraduate degrees, 40 graduate degrees, as well as
doctoral degrees in forestry, educational leadership, and school psychology. SFA intends to increase its
focus on science, technology, engineering and mathematics (STEM) fields and was approved in 2014 to
offer four-year engineering degrees.
POSITIVE FINANCIAL RESULTS
SFA has generated positive GAAP-based operating margins averaging 2% over past five years, including
2.8% in fiscal 2014. SFA managed well through state appropriation cuts and moderate enrollment
declines to maintain positive margins; the university increased tuition, contained expenses, and deferred
certain projects. Fitch believes SFA is well-positioned to continue positive operating trends, as state
operating support has increased and pressured enrollment has stabilized.
Healthy operating performance has allowed SFASU to maintain a stable balance sheet with satisfactory
cushion. As of Aug. 31, 2014, available funds, defined by Fitch as cash and investments less nonexpendable restricted net assets, covered 53% of fiscal 2014 operating expenses and 56.6% of pro
forma debt (including expected $46 million issuance in mid-2016). These metrics are in line with similarly
rated peers.
STABILIZED ENROLLMENT
SFA's enrollment stabilized as expected in fall 2014, following declines in the two prior years.
Undergraduate headcount (approximately 86% of total) declined by a moderate 3.2% from fall 2011 to fall
2013 due to a deliberate tightening of admission standards in fall 2012 and large graduating classes.
Fitch views increased student retention and quality metrics over that period, as well as stabilized total
enrollment and freshman matriculation in fall 2014, as evidence of the strategy's success. SFA expects
incremental growth over the medium term, with the fall 2015 incoming class expected to grow slightly over
the prior year.
MODERATELY HIGH DEBT BURDEN
MADS consumed a moderately high 8.3% of fiscal 2014 operating revenues. However, MADS coverage
from operations remains sound at 1.7x in fiscal 2014 and averaging 1.5x over the past five years. SFA's
conservative debt structure (fixed-rate, 20-year amortization, and level-to-declining total debt service)
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partially mitigates this leverage.
Importantly, 27% of outstanding bonds are tuition revenue bonds (TRBs), which the state historically
supports through appropriations, and 3% are constitutional appropriation bonds, supported from the
university's annual general revenue appropriations from the constitutionally endowed State of Texas
Higher Education Fund. SFA received a $46.4 million TRB authorization in the state's 2016-2017
biennium budget and expects to issue that amount in mid-2016 for a new STEM building. Fitch does not
believe that this additional debt changes the university's overall debt profile.
Contact:
Primary Analyst
Tipper Austin
Associate Director
+1-212-908-9199
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
Secondary Analyst
Susan Carlson
Director
+1-312-368-2092
Committee Chairperson
Joanne Ferrigan
Senior Director
+1-212-908-0723 (http://clio.columbia.edu/catalog?q=2129080723&search_field=isbn&)
Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email:
sandro.scenga@fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Related Research:
--'Stephen F. Austin State University, Texas' (September 2013);
--'Fitch Rates Stephen F. Austin State Univ, Texas RFS Bonds 'AA-'; Outlook Stable (September 2013).
Applicable Criteria
Revenue-Supported Rating Criteria (pub. 16 Jun 2014)
(https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012)
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U.S. College and University Rating Criteria (pub. 12 May 2014)
(https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748013)
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
(https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=990289)
Solicitation Status (https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990289)
Endorsement Policy (https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?
context=2&detail=31)
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