Posted on Friday, May 16, 2025
Fitch upgrades TSU's bonds to A-
Fitch Ratings has upgraded Texas Southern University's (TSU) Issuer Default Rating (IDR) and the approximately $119 million of outstanding revenue financing system (RFS) bonds issued by the Texas Public Finance Authority on behalf of Texas Southern University to 'A-' from 'BBB+'.
The Rating Outlook is Stable.
“Texas Southern has demonstrated a stronger financial position over the past year which has resulted in an increased rating from Fitch Ratings agency,” said Interim Chief Financial Officer John Pittman. “This significant upgrade is the result of new university leadership and strong efforts by the university community to maintain a commitment to fiscal responsibility.”
TSU's IDR and RFS bond rating upgrade to 'A-' from 'BBB+' reflects the university's generally improving enrollment trajectory since 2021, which Fitch and the University expect will likely continue. This trend has contributed to recent gains in revenue from tuition and fees, a return to positive operating margins, and stronger than historical adjusted cash flow margins.
TSU benefits from solid and consistent operating, debt and capital support from the state of Texas (IDR AAA/Stable). Fitch expects TSU will maintain adjusted cash flow margins of no less than 12% going forward in its 'a' Operating Risk assessment, despite very high potential life cycle investment needs that are reflected in a steadily weak average age of plant of over 15 years. The Stable Outlook reflects Fitch's view that TSU's current leverage ratios will remain consistent with an 'a' assessment through Fitch's modelled revenue and investment stress scenario, while holding on to some new debt capacity.
Nonetheless, TSU retains characteristics of a weaker than average student demand profile relative to student retention and graduation rates. Fitch views these below average demand characteristics as a 'Weaker' asymmetric additional risk consideration, which constrains the 'bbb' Revenue Defensibility assessment.
The full report is available here.
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