OREANDA-NEWS. Fitch Ratings has affirmed the 'F1+' rating on Baylor University, TX's (BU) \\$50 million authorized taxable commercial paper (CP) notes, series A.

SECURITY

Baylor's CP program is an unsecured, general obligation of the university.

KEY RATING DRIVERS

UNIVERSITY FINANCIAL FLEXIBILITY: Baylor's positive operating performance and existing balance sheet resources continue to provide an adequate level of financial flexibility, particularly given the university's strong demand profile and stable enrollment. Fitch maintains a long-term 'A+' rating on the university's outstanding revenue bonds.

SUFFICIENT LIQUID RESOURCES: The 'F1+' rating is based on BU's general credit strength and its ability to cover the maximum potential liquidity presented by its taxable CP program by at least 1.25x from internal resources. Investments are discounted based on Fitch's criteria.

RATING SENSITIVITIES

SUFFICIENT LIQUID RESOURCES: Baylor University currently has liquid resources to support the 'F1+' short-term rating. Should these resources decline relative to self-liquidity debt, there will be negative rating implications.

STRONG INSTITUTIONAL CHARACTERISTICS: Baylor continues to demonstrate solid financial characteristics consistent with its long-term rating. Should the long-term rating fall below its current 'A+' rating, the short-term rating will be downgraded per Fitch's criteria.

CREDIT PROFILE

Baylor was chartered by the Republic of Texas on Feb. 1, 1845 and is the oldest continuously operating institution of higher learning within the state. Management reports that it is the largest Baptist university in the world and offers undergraduate and graduate degrees to students at its campus in Waco, Texas. Most students originate from within the state, and student quality well exceeds state and national averages.

The 'F1+' rating is based on the availability of highly liquid, highly rated securities to cover the liquidity demands presented by BU's taxable CP program. The program has a maximum authorization of \\$50 million, and approximately \\$15 million is currently outstanding. As of Aug. 31, 2015, available liquid assets, as adjusted per Fitch's criteria, totaled \\$199.6 million, providing 4.0x coverage of the maximum CP authorization. Fitch views this level as healthy, and consistent with the minimum 1.25x coverage expectation for the highest short-term rating.

Baylor does not maintain any self-liquidity exposure to variable rate debt instruments aside from its CP program. At present, approximately \\$64.9 million of series 2008A VRDBs have bank liquidity support.

The university's underlying credit strengths further support the rating. Operating results for the fiscal year ended May 31, 2015 were significantly stronger than fiscal 2014 on a full accrual basis at 6.9%, supported in part by an increase in net tuition revenue driven by improved demand metrics. Fitch considers the university's conservative, long-term financial planning to be a positive factor. Baylor's fiscal 2015 debt burden was moderate at 5.4%.

Baylor's enrollment and demand trends support the university's operating revenues, which remain favorable. Headcount enrollment has grown consistently over time, reaching 15,616 in fall 2013 and 16,263 in fall 2014. Management reported that the fall 2015 headcount enrollment was 16,787.