New York, November 21, 2012 --

Moody's Rating

Issue: Refunding Revenue Bonds, Series 2012A; Rating: Baa1; Sale Amount: $9,220,000; Expected Sale Date: 11/28/2012; Rating Description: Revenue: Public University Limited Pledge

Issue: Refunding Revenue Bonds, Series 2013A; Rating: Baa1; Sale Amount: $2,780,000; Expected Sale Date: 11/28/2012; Rating Description: Revenue: Public University Limited Pledge

Opinion

Moody's Investors Service has assigned a Baa1 to West Virginia State University's Refunding and Improvement Revenue Bonds, Series 2012 A and 2013 A issued through the West Virginia State University Board of Governors. Moody's has also downgraded the rating on the university's ($3.38 million) outstanding Series 2002 revenue bonds to Baa1 from A3. The outlook remains negative. The 2002 bonds are anticipated to be completely refunded by the series 2013 A bonds.

SUMMARY RATING RATIONALE

The Baa1 is based on West Virginia State University's (WVSU) decreasing enrollment, declining tuition revenue, and modest balance sheet which will be leveraged with an additional $7 million in debt from the 2012 bonds. The rating also incorporates the WVSU's overall revenue diversity due to significant state support and federal grant revenue. However, an anticipated cut to state funds in 2014 and the possibility of federal cuts due to the budget pressure also threaten these revenue sources. The negative outlook reflects enrollment trends, limited flexible reserves and modest operating performance, in spite of improved budget and management practices adopted by the new administration in coordination with West Virginia'sHigher Education Policy Commission (HEPC).

CHALLENGES

* Declining enrollment since fall 2009 has pressured tuition revenues. Enrollment drops were due in part to the relocation of the Kanawha Valley Community & Technical College to a location off campus and state mandate requiring minimum GPA and test score standards for admission.

* While a new management team at the university is focused on improving student demand and operating performance, past practices have left the university with limited reserves, declining enrollment and competitive weakness relative to other public colleges and universities in West Virginia.

*Modest balance sheet further pressured by 94% increase in additional debt (approximately $7 million) from the Series 2012 A bonds. Total cash and investments of $7.5 million well below Moody's median of $24.8 million for public universities with a senior most A3 rating.

* Operating cash flow performance, while improved in FY 2012, remains modest and is further challenged by revenue losses from the separation from the community college.

*High age of plant at 19.47 years, though this may reduced somewhat by the planned $21 million in capital improvements over the next 3 years.

*New legal security supporting Series 2012 and 2013 bonds, while broader, remains narrow with pledged revenues of $2.3 million at just 5% of Moody's adjusted operating revenue. In addition, new bonds will not have a debt service reserve fund requirement.

STRENGTHS

* Healthy support from Aa1-rated state partially offsets revenue losses due to enrollment declines and student market challenges.

* Improved operating performance projected in 2012 due new management actions to reduce operating expenses and create a balanced budget (based on unaudited 2012 results).

* History of federal support from grants provides enhanced revenue diversity although federal budget pressure could constrain this revenue stream.

*Expanded revenue pledge provides enhanced (3.29x as compared to 1.06x) debt service coverage for new bonds.

OUTLOOK

The negative outlook reflects the potential continuation of recent enrollment trends, limited flexible reserves and modest operating performance. The outlook also incorporates potential declines in net tuition revenue, state support and federal funding.

WHAT COULD MAKE THE RATING GO UP

Not likely at this time. Strengthening of operating performance and growth in cash flow generation and coverage of debt service, reduction of operating leverage, substantial growth in cash and investments, growth in net tuition revenues and enhanced enrollment stability.

WHAT COULD MAKE THE RATING GO DOWN

Further deterioration in operating performance resulting in weaker operating cash flow generation and debt service coverage; decrease in net tuition revenues; material decline in state or federal support; weakened student demand reflected in declining enrollment. Also, further capital spending without strengthening its balance sheet resources and liquidity.

The principal methodology used in this rating was U.S. Not-for-Profit Private and Public Higher Education published in August 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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Heidi Wilde Analyst Public Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Dennis M. Gephardt Vice President - Senior Analyst Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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