Massachusetts State College Bldg. Auth., MA -- Moody's assigns Aa2 rating to Massachusetts State College Building Authority's $148.4 million Series 2012C Project Revenue Bonds and affirms ratings...

New York, November 27, 2012 -- Moody's Rating

Issue: Series 2012C Project Revenue Bonds; Rating: Aa2; Sale Amount: $148,390,000; Expected Sale Date: 12-06-2012; Rating Description: Revenue: Public University Broad Pledge

Opinion

Moody's Investors Service has assigned a Aa2 rating to the Massachusetts State College Building Authority's (the authority's or MSCBA's) $148.4 million of Series 2012C Project Revenue Bonds. We have also affirmed ratings on the authority's outstanding bonds. The outlook is stable.

SUMMARY RATING RATIONALE: The Aa2 rating reflects MSCBA's role as a component unit of the Commonwealth of Massachusetts to design and construct auxiliary facility projects (such as housing, parking, and student activity centers) across the Massachusetts State University System. The rating reflects strong oversight of these auxiliary projects, healthy operating performance of the projects and multi-year enrollment growth across the campuses, presence of an aggregate state appropriation intercept, and a fully funded debt service reserve fund and other available reserves.

STRENGTHS

*Continued enrollment growth across the state universities (42,127 total full-time equivalent enrollment in fall 2012, based on preliminary calculations for fall 2012 enrollment) and high occupancy levels in the bond-financed facilities

*Strong management and oversight of the projects and borrowing plans, with a good track record of project completion on time and within budget and ongoing reinvestment in projects with resulting low deferred maintenance backlog

*Ability of State Comptroller to intercept remaining current-year state appropriations to the universities and direct appropriations to the bond trustee for payment of debt service or replenishment of joint debt service reserve fund, with revisions during 2011 to the intercept language within the statute allowing for intercept of appropriations of one university to support debt service deficiency at any campus

*Fully fixed rate debt structure with no use of derivatives providing for predictable debt service

CHALLENGES

*Significant capital investment on the campuses in recent years and resulting rapid increase in debt (MSCBA will have $1.1 billion of pro-forma debt, nearly double the amount of debt in FY 2008) with additional borrowing anticipated in the next two years

*Pressure on state operating support requiring the state universities to focus on revenue diversification, growth of private revenue streams, expense containment, and operating efficiency

*Public and political resistance to growth of student charges and increased price sensitivity of families limiting public universities' capacity to grow student charges longer-term (average combined tuition and fee charges at the 9 Massachusetts state universities have increased rapidly over the past four years, with the academic year 2012-2013 combined charges (tuition plus fees) up 29% over academic year 2008-2009)

*Demographic projections for a decline in the number of high school graduates in Massachusetts

Outlook

The stable outlook for the authority's Aa2 rating is based on the strength of the pledged revenues derived from a strong market position with growing enrollment and high occupancy levels, legal provisions including aggregate intercept provision, and reserve fund as well as strong management oversight of project construction and management.

WHAT COULD MAKE THE RATING GO UP

Significant growth and diversification of pledged revenues, additional reserves under the control of the authority and improved credit quality of the commonwealth.

WHAT COULD MAKE THE RATING GO DOWN

Inability to meet debt service requirements from auxiliary revenues at the campuses; decline in the credit quality of the commonwealth; an increase in debt absent growth of reserves and revenues to cover increased debt service responsibilities.

PRINCIPAL RATING METHODOLOGY

The principal methodology used in this rating was U.S. Not-for-Profit Private and Public Higher Education published in August 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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Kimberly S. Tuby VP - Senior Credit Officer Public Finance Group Moody'sInvestors Service, Inc.60 State Street Suite 700 Boston, MA 02109 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Eva BogatyAsst Vice President - Analyst Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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