Contact: Monty Jones, (512) 499-4363

Date: December 23, 1997

UT System News Release

Standard & Poor's Upgrades U.T. System Bonds

AUSTIN – Revenue bonds that support construction projects throughout The University of Texas System were assigned the highest rating, AAA, on Tuesday (Dec. 23) by Standard & Poor's.

In a news release issued in New York, the company said the upgrade raises the rating two notches above the State of Texas' general obligation bonds and places the U.T. System bonds "on a par with some of the most selective and wealthy private education credits in the country."

The company said a link to the state's bond rating has become less meaningful as state support for higher education, although still strong, has become "one of several significant revenue streams rather than the most crucial source."

Standard & Poor's said the rating reflects the scope of the U.T. System's $4.5 billion operating budget in fiscal 1997; broad diversity in sources of revenue; significant financial resources such as the Permanent University Fund and other endowments; high levels of state support; and high-profile educational institutions that include "significant research activity, a visible and profitable health care component, and one of the largest student enrollments in the U.S."

The decision by Standard & Poor's follows a similar rating upgrade of U.T. System revenue bonds by Fitch Investors Service last September. The U.T. System's Permanent University Fund bonds were rated AAA by Standard & Poor's in 1996.

The rating announced Tuesday applies to revenue financing system bonds series 1998A and 1998B, as well as outstanding revenue financing system bonds. The company also announced Tuesday that it was affirming a rating of A-1-plus on U.T. System revenue financing system commercial paper series A.

"We are pleased to receive this significant upgrade of the U.T. System's revenue bonds," said R.D. (Dan) Burck, executive vice chancellor for business affairs. "The system and all of its 15 component institutions have worked very hard to merit this high level of confidence. With this higher rating, we will pay less in interest to bond holders, and that will greatly enhance our ability to maintain excellent educational facilities."

Comparable bond rating upgrades in the past have resulted in savings of about $1 million on each $100 million worth of construction projects.

Donald L. Evans, chairman of the Board of Regents, said: "This decision by Standard & Poor's is very good news indeed for all Texans. The new rating is testimony to the strength and efficiency of the U.T. System, and it will result in significant savings for our System-wide capital improvement program."

U.T. System Chancellor William H. Cunningham stated: "The decision by Standard & Poor's is another strong vote of confidence in the U.T. System. It reflects the continuing excellent work of Vice Chancellor Burck and his entire financial and business management staff."