Moody’s Negative on ASU

Moody’s Investors Service has revised its outlook for Alabama State University’s A2 rating to negative from stable due to concerns about its increasingly leveraged balance sheet and limited growth in financial resources as the current economic climate undermines its traditional level of state support.

“The outlook change also reflects the university’s debt portfolio with outstanding auction-rate bonds, a swap agreement, and a swaption that could be exercised by the counterparty within the next two years,” said a report by Moody’s analyst Amy Tanaka.

The negative outlook also incorporates the university’s increasingly competitive environment with weakening matriculation rates and the continuing decline in the size of its incoming freshman class through fall 2010, Tanaka said.

The rating action was in concert with Moody’s review of ASU’s upcoming sale of $47.5 million of taxable Build America Bonds and $7.5 million of taxable direct-pay recovery zone revenue bonds. Proceeds will fund the construction of a 30,000-seat football stadium and pay the premium on a surety bond by Assured Guaranty Corp. to fund the debt-service reserve.

After the upcoming sale, the university will have about $233 million of outstanding debt rated by Moody’s.

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