American University, DC LOCs on the series 1999 and 2003 bonds were replaced with direct-purchase agreements with Wells Fargo (with expiration on Feb. 1, 2018).


The LOCs on the series 1999 and 2003 bonds were replaced with direct-purchase 
agreements with Wells Fargo (with expiration on Feb. 1, 2018). The series 2008 
is now a direct purchase with U.S. Bank (with expiration February 2020). In 
our opinion, this debt is a contingent liability given the expiration within 
five years and the put risk associated with the direct-purchase agreements.

The 'A-1' rating reflects our view of AU's self-liquidity program. The 
university has committed several sources of funds, including its working 
capital and endowment to support its outstanding unenhanced CP program ($125 
million is authorized). As of Aug. 31, 2017, AU held cash, fixed-income, and 
domestic equity assets in excess of $514 million. S&P Global Ratings continues 
to monitor both the sufficiency and liquidity available on a monthly basis to 
ensure the university can cover a failed remarketing for the outstanding CP. 
In our opinion, there is ample liquidity provided through the money held in 
domestic equities, cash and high-quality, short-term, fixed-income securities.

The stable outlook reflects our view of the university's continued robust 
operating performance and solid demand. However, offsetting credit factors 
include what we consider only sufficient financial resources compared with 
debt, a measurable degree of event-driven risk associated with both its high 
level of variable-rate demand debt and direct-purchase debt exposure, and 
increased capital spending.

A lower rating or negative outlook is unlikely during the two-year outlook 
period given the university's solid demand profile and consistently strong 
operating performance. We could consider a negative rating action over time if 
available resources compared with debt do not remain in line with the rating, 
or if there is a substantial decrease in enrollment or operating performance 
from current levels.

A higher rating or positive outlook is unlikely during the two-year outlook 
period due to the university's additional debt issuance, somewhat aggressive 
debt structure associated with multiple bullet maturities, and available 
resources that remain below average for the rating category and are not yet 
consistent with a higher rating. We could consider a positive rating action 
over time if the university can show substantial growth in available resources 
while maintaining demand metrics at current levels or better.