April 2-3, 2009

OPEN – FIN – INFO 1 April 2-3, 2009

OPEN – FIN – INFO 1

University of Missouri System

Debt Capacity Report

a

April 2-3, 2009

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Debt Outstanding by CampusJune 30, 2008

• Columbia $ 496 million• Kansas City 74 million• St. Louis 75 million• Rolla 56 million• UM Healthcare 157 million• Total $858 million

b

April 2-3, 2009

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Future Debt Financing Needs*FY2009 – 2015

Five-Year Capital Plan

Dollars in 000's

Not YetDebt Financing Needs Board Approved Approved

Columbia $140,195 $85,371

Kansas City 71,872 131,910

Rolla 12,976 13,268

St. Louis 3,350 74,726

Health System 120,000 20,000

Total $348,393 $325,275

*See Capital Projects list for detail

c

April 2-3, 2009

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System Facilities 2009Preliminary Proposed Projects

• Columbia• Energy Management - $62,100,000 *• Hudson/Gillett renovation - $38,145,000

• Health System• Orthopedic Institute and Surgery Tower - $140,000,000

• Kansas City• Soccer/Track facility - $8,000,000• Student Union - $36,800,000• Interactive Learning Ctr Phase I South - $10,000,000• Oak St W Phase II - $17,072,030

• MO S&T• Thomas Jefferson South - $12,976,483

• St. Louis• Flushing Meadows - $3,350,000

• Refinance any existing debt with attractive present value savings (to be determined)

• PRELIMINARY TOTAL - $328,443,513*

* Total debt funding of $102.05 million required over term of the project.

d

April 2-3, 2009

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Build America Bonds

• Part of the U.S. Government stimulus package

• Bonds must be issued by 12/31/10

• Municipal issuers receive a 35% federal tax credit on each interest

payment date for the life of the bond

• Typically long bullet maturity and large size (at least $100M; preferably

$250M)

• Doesn’t provide the optional call provision that is typically available for tax

exempt issues

• Gain access to a more expansive, global investor base looking for

diversification and longer duration

• Currently provides issuers with approximately 0.80% - 1.20% of annual

savings in the longer maturity range (20-30 years)

e

April 2-3, 2009

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University of Missouri System Credit Ratings

• University of Missouri Long-term Debt Ratings

-- Moody’s - Aa2

-- Standard & Poor’s - AA

• Moody’s Long-Term Debt Rating Definitions

-- Aaa - strongest creditworthiness

-- Aa - very strong creditworthiness

-- A - above-average creditworthiness

-- Baa - average creditworthiness

f

April 2-3, 2009

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Estimated Debt Capacity Before FY2010 Bond Issue

• Credit rating is based on ratio analysis plus additional factors such as state support, market position and management

• The University’s potential debt capacity ranges were estimated using five different financial ratios (see Appendix for further detail)• Aa2 rating

• Additional net capacity of $0 to $418 million as of February 2009

• Aa3 rating• Additional net capacity of $71 million to $844 million as

of February 2009

Note: Net debt capacity is prior to the issuance of System Facilities 2009 ($328.4 million)

g

April 2-3, 2009

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Projected Debt Capacity After FY2010 Bond Issue

Estimated Future Debt Capacity Over Five Years (FY2010-2014)

Unrestricted Net Asset Growth

Aa2 rating Aa3 rating

0% $0 $300 million declining to $260 million

5% $39 million growing to $268 million

$455 million growing to $773 million

8% $111 million growing to $547 million

$551 million growing to $1.1 billion

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APPENDIX

i

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Estimate of Incremental Debt Capacity($ in millions)

RatioImplied Max Debt Capacity ($ million)

Net Additional Debt

Unrestricted Financial Resources to Debt

University of Missouri – Feb 2009 1.19

Aa2 Median 0.80 $1,276 $418

Aa3 Median 0.60 $1,702 $844  

 

Debt Service Coverage

University of Missouri - June 2008 4.8

Aa2 Median 3.5 $1,063 $184

Aa3 Median 3.2 $1,163 $284

Expendable Resources to Debt (x)

University of Missouri - Feb 2009 1.52

Aa2 Median 1.80 $725 ($133)

Aa3 Median 1.30 $1,004 $146

j

April 2-3, 2009

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Additional Ratios Used to Calculate Implied Debt Capacity

Ratio

Implied Max Debt Capacity ($million) Net Additional Debt

Total Resources to Debt (x)

University of Missouri - Feb 2009 2.2

Aa2 Median 2.8 $664 ($194)

Aa3 Median 2.0 $929 $71

Debt to Cash Flow (x)

University of Missouri - June 2008 3.4

Aa2 Median 3.8 $ 991 $112

Aa3 Median 4.6 $1,200 $320

k

April 2-3, 2009

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Debt Capacity Credit Profile$ in millions

Moody's Moody's FY FY FY

Ratio/Statistic Aa2 (1) Aa3 (1) 2006 2007 2008Total Direct Debt ($) 663.7 415.9 677.2 662.1 879.6 Total Financial Resources ($) 2,025.3 899.6 1,731.8 1,924.1 1,990.7 Total Cash & Investments ($) n/a n/a 1,931.0 2,131.4 2,267.5 Total Revenues ($) 1,777.7 932.2 2,149.6 2,248.4 2,392.0 Total Expenses ($) 1,515.5 922.3 2,044.2 2,134.6 2,294.2

Market DataTotal enrollment FTE (#) 41,306 27,921 47,752 48,431 48,994 Net Tuition per Student ($) 7,821 6,251 7,117 7,489 7,710 State appropriation per student ($) 9,351 10,310 8,982 9,103 9,435 Total tuition discount (%) 27.8 27.7 32.2 32.6 32.2

Contribution Ratios (% of Total Revenues)Net tuition and fees 16.7 16.7 15.8 16.1 15.8 Auxilliary enterprises 11.5 8.0 11.2 11.5 12.6 Investment income 2.6 1.7 3.6 3.8 4.0 Grants and contracts 21.0 21.0 13.4 12.8 13.6 State appropriation 26.1 31.5 20.0 19.6 19.3 Patient care - - 28.9 28.9 28.5

(1) Moody’s Public College and University Medians 2007 (Based on 2006 Financial and Enrollment Data)

l

April 2-3, 2009

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Debt Capacity Credit Profile$ in millions

Moody's Moody's FY FY FYRatio/Statistic Aa2 (1) Aa3 (1) 2006 2007 2008Capital RatiosUnrestricted financial resources to debt (x) 0.80 0.60 1.09 1.23 1.03 Expendable financial resources to debt (x) 1.80 1.30 1.63 1.79 1.45 Direct debt per student ($) 12,941 12,305 13,983 13,515 17,236 Actual debt service to operations (%) 2.5 3.1 2.1 2.1 2.4 Age of plant (#, in years) 11.1 11.6 10.7 10.7 10.8

Balance Sheet RatiosUnrestricted financial resources to operations (x) 0.24 0.22 0.36 0.38 0.39 Expendable financial resources to operations (x) 0.63 0.50 0.54 0.56 0.55 Total financial resources per student ($) 43,575 26,003 35,758 39,272 39,009

Operating RatiosAnnual operating margin (%) 2.8 1.9 4.9 5.1 4.1 Actual debt service coverage (x) 3.5 3.2 5.8 5.9 4.8 Return on net assets (%) 9.4 7.1 6.6 9.8 3.8

(1)Moody’s Public College and University Medians 2007 (Based on 2006 Financial and Enrollment Data)

m