Fitch Ratings Tuesday downgraded $75 million of bonds issued for the University of Redlands by three notches because of dire finances.
The rating agency dropped the rating on the revenue bonds, issued through the California Educational Facilities Authority, to BBB from A due to a "substantially weakened financial profile."
Redlands has had five consecutive years of operating margin deficits and major declines in balances cushions, according to Fitch.
At the end of 2010, available funds provided coverage of 28% of annual operating expenses — compared to 85% when Fitch started coverage — and 34% of outstanding long-term debt, compared to 94%.
In response to the weak finances, the university has hired a financial consultant to help with long-term planning and to create a three-year financial plan.
Redlands has also cut faculty and non-faculty positions.
Fitch said the university's overall enrollment has improved but trends have varied. Student-generated revenues make up 82% of the school's fiscal 2010 operating revenues.
