S&P: University of Louisiana at Lafayette's Student Housing And Parking Project Revenue Bonds Assigned 'BBB+' Rating

S&P Global Ratings assigned its 'BBB+' long-term rating to the Louisiana Local Government Environmental Facilities Community Development Authority's series 2018 student housing and parking project revenue bonds, issued for the Ragin' Cajun Facilities Corp. (the corporation) at the University of Louisiana at Lafayette. At the same time, we affirmed our 'BBB+' underlying rating (SPUR) on the corporation's series 2010, 2012, and 2017 student housing and parking bonds. In addition, S&P Global Ratings affirmed its 'A-' SPUR on the Lafayette Public Trust Financing Authority's series 2010 higher education revenue bonds (student union bonds), issued on behalf of the corporation. Also, we affirmed our 'BBB+' SPUR on the Louisiana Local Government Environmental Facilities Community Development Authority's series 2013 revenue bonds issued for the corporation's Lewis Street parking garage project and athletic facilities project. The outlook on all ratings is stable.

The $49 million series 2018 student housing and parking project bonds are being issued to construct a 589-bed student housing project.

"The ratings reflect our view of the university's strong enterprise profile and adequate financial profile," said S&P Global Ratings credit analyst Phillip Pena.

We assessed the university's enterprise profile as strong, reflecting solid selectivity, matriculation, and retention rates, along with a relatively steady enrollment base. We assessed the system's financial profile as adequate, reflecting a relatively weak balance sheet and a history of negative operations on a full-accrual basis, though we note operations are improved relative to last year. When we combine the enterprise profile and financial profile, they generate an indicative standalone credit profile of 'bbb+'. As our criteria indicate, our final rating can be within one notch of the indicative standalone credit profile. In our view, the 'A-' rating better reflects the university's solid demand profile relative to those of peers.

The stable outlook reflects our expectation that enrollment and demand will remain strong over the next two years such that net tuition revenue continues to grow. The outlook also reflects our expectation that operations will remain stable or improve, and that the balance sheet will not experience any further material deterioration.

We could lower the rating over the next two years if balance sheet resources weaken, significant additional new debt is issued without a commensurate increase in financial resources, or if operating margins worsen relative to fiscal 2017. We could also consider a negative rating action if state appropriations materially worsen such that operating margins substantially weaken, or if pension obligations are shifted to the university. With regard to the auxiliary, parking, and athletic revenue bonds, we could take a negative rating action if the debt metrics significantly weaken.

Although unlikely during the outlook period, an improvement in balance sheet resources and movement toward positive operations on a full-accrual basis would be viewed positively.
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