OREANDA-NEWS. February 16, 2016. Fitch Ratings affirm the 'F1+' rating on Stanford University's (Stanford, or the university) \\$201.4 million of outstanding California Educational Facilities Authority variable-rate demand bonds, \\$500 million taxable commercial paper (CP) program and \\$300 million tax-exempt CP program.

SECURITY

The revenue bonds and CP are unsecured general obligations of Stanford.

KEY RATING DRIVERS

FINANCIAL STRENGTH OF STANFORD: The university maintains a strong credit profile, evidenced by consistently strong financial performance; vast balance sheet resources; industry leading fundraising activity; and outstanding student demand. Fitch maintains a long-term 'AAA' rating on Stanford's revenue bonds, with a Stable Rating Outlook.

SUFFICIENT LIQUID RESOURCES: The 'F1+' rating is based on Stanford's ability to cover the maximum potential liquidity demands presented by its variable-rate debt programs by at least 1.25x from internal resources. Such resources include cash and highly liquid, highly rated investments.

RATING SENSITIVITIES

REDUCTION IN LIQUID RESOURCES: Material erosion in internal liquid resources and/or significant downward movement in Stanford's long-term rating, while highly unlikely, will influence the short-term rating.

CREDIT PROFILE

Stanford is a highly selective, comprehensive private university located in Palo Alto, California. Total undergraduate and graduate enrollment was 16,092 for fall 2015, up 0.4% since fall 2014. Freshmen applications to the university increased 1.4% over this same period, reaching 42,497 for fall 2015. The university's undergraduate acceptance rate was highly selective at 5%, with a significant 80.4% of accepted students choosing to enroll. Stanford's prestigious graduate programs maintain similarly selective admissions, with an overall acceptance rate of around 9.7%.

Stanford's President (John Hennessy) has announced plans to step down after 16 years of leading the university. After a national search to find Stanford's 11th President (led by a 19-member search committee), the new President (Marc Tessier-Lavigne) was announced on Feb. 4, 2016 and will assume this new role on Sept. 1, 2016. Current President Hennessy will continue in his role until Aug. 31, 2016 and plans to return to teaching and research.

INTERNAL LIQUIDITY SUPPORTS SHORT-TERM DEBT OBLIGATIONS

As of Dec. 31, 2015, Stanford's liquid investments, consisting primarily of money market funds, U.S. government and agencies securities, U.S. municipal bonds, and investment grade U.S. corporate bonds, totaled approximately \\$2.44 billion (after discounts based on asset type and maturity per Fitch's short-term rating criteria). These liquid assets provide strong coverage of the university's \\$201.4 million of variable-rate demand bonds and full \\$800 million of authorized taxable and tax-exempt CP, exceeding the 1.25x coverage Fitch expects for an 'F1+' rating.

To limit potential calls on its liquidity, Stanford restricts the amount of CP that may come due on any given day to \\$50 million. Fitch views favorably Stanford's detailed and regularly updated procedures for failed remarketing of CP and variable-rate demand notes.

For additional information, see 'Fitch Rates Stanford University's (CA) Ser. 2015 Rev Bonds 'AAA'; Outlook Stable' (April 17, 2015).