OREANDA-NEWS. Fitch Ratings has assigned a rating of 'AA-' to the following bonds to be issued by the UCF Convocation Corporation (UCFCC).

--\$45.2 million revenue refunding bonds, series 2015A;
--\$32.3 million taxable revenue refunding bonds, series 2015B.

The bonds are expected to sell the week of June 29 via negotiation. Proceeds will be used to retire the outstanding 2005 certificates of participation (not rated by Fitch) and to pay costs of issuance. The series 2005 certificates were used to fund the construction of the convocation center, renovation of the then existing arena, and construction of surrounding retail space on the University of Central Florida's (UCF) main campus.

The Rating Outlook is Stable

SECURITY

The bonds are secured by a lien on pledged revenues related to the arena and convocation center. The largest components of the pledge are annual payments from UCF under an operating agreement and the surplus revenues of UCFCC's housing system. In addition, UCF covenants via a support agreement to waive or defer its expenses if UCFCC operations are stressed and to replenish draws on the debt service reserve fund from its legally available revenues. The debt service reserve fund is expected to be surety-funded to maximum annual debt service (MADS) at issuance.

KEY RATING DRIVERS

UCF SUPPORT AND HIGH CONNECTIVITY: UCFCC is a direct support organization (DSO) of UCF, created to finance and operate certain essential assets for the university. The 'AA-' rating reflects the essentiality of the assets, overlapping management of UCF and UCFCC, UCF's financial support of UCFCC operations, and UCF's agreement to replenish debt service reserve draws.

UCF CREDIT PROFILE: UCF's capacity to support UCFCC is a credit strength. The university's strong credit profile is characterized by a very large enrollment base, solid demand, positive operations, healthy balance sheet resources, and a moderately low debt burden.

PROJECT VIABILITY: UCFCC assets have been complete and operating since 2007 with good demonstrated demand. Fitch believes UCFCC's consolidated (including center/arena and housing operations) economic coverage of debt service from operations demonstrates underlying project viability and good management.

RATING SENSITIVITIES

UCF CREDIT PROFILE: The University of Central Florida's (UCF) willingness and ability to support the operations and debt of the essential UCF Convocation Corporation (UCFCC) are the primary credit strength. Deterioration of UCF's very strong credit profile or any indication of reduced willingness to support UCFCC could result in negative rating action.

CREDIT PROFILE

Formed in 2005, UCFCC is a not-for-profit corporation organized and operated for the benefit and purposes of UCF. It is a certified DSO of the university under FL law. UCFCC management is effectively integrated with UCF management. In addition to the center and arena, UCFCC also financed and operates certain housing assets which make up approximately one third of UCF's housing capacity on the main campus.

UCF was founded in 1963 and is one of the 12 universities in the State University System of Florida (student fee bonds rated 'AA' by Fitch). The university serves over 61,000 students on its main campus, hospitality campus, and health sciences campus in Orlando, FL and its 10 regional locations.

ESSENTIALITY AND UCF SUPPORT ANCHOR RATING

Fitch considers UCF's support of and close ties to UCFCC to be the bonds' primary credit strength. Fitch believes UCF's support is reliable based on the essentiality of the assets and extensive integration of management between UCF and UCFCC.

This connection is evidenced by an operating agreement, whereby UCF pays UCFCC an annual fee to operate the facility and for a minimum number of priority use days. The university has also agreed under a support agreement to waive or defer charges for utilities and other services it provides UCFCC if debt service coverage from net pledged revenues is expected to fall below 1.2x. Fitch believes the strength of this requirement is enhanced by the flow of funds directing pledged receipts to debt service accounts on a first-fill basis.

In addition to legally required support, UCF management maintains and has provided unpledged methods of support for UCFCC operations. The university holds certain unencumbered funds available for transfer to UCFCC without budget amendment or appropriation. In addition, UCF management maintains the ability and has expressed willingness to increase its fee under the operating agreement in order to maintain 1.2x net coverage from pledged sources, if necessary. Fitch believes UCFCC's ability to meet its debt service obligations from operations is strong based on underlying project viability before UCF support and UCF's multiple requirements and unpledged options to support UCFCC operations. If a draw is required on the debt service reserve fund, however, UCF also covenants to replenish the reserve from its legally available revenues.

CREDIT STRENGTH OF UCF

UCF's capacity to support UCFCC is very strong. Legally available revenues under the support agreement are expected to total \$169.2 million at June 30, 2015, more than 16x the combined MADS of the series 2015 bonds and the Golden Knights Corporation certificates of participation for which legally available revenues are also pledged.

The university's overall credit profile is characterized by a very large enrollment base, with over 61,000 students and solid demand. UCF returned to its general trend of positive GAAP-based operating results in fiscal 2014 following restoration of substantial state operating appropriations that were cut in prior years. The university is well-positioned for additional state funding based on its favorable results on FL's performance funding metrics. UCF's balance sheet resources are healthy, with available funds (cash and investment less certain restricted net assets) equal to 50.5% of operating expenses and 78.4% of debt. In addition, UCF maintains a low debt burden, with MADS consuming only 3.1% of fiscal 2014 operating revenue. Including all component unit and DSO debt, UCF's debt burden remains moderate at 5.7%, with strong coverage from operations typically above 2x.