McLean School, Md., 2001 Bonds Lowered to BB-Plus by S&P

Standard & Poor's Ratings Services said it lowered its long-term rating to BB-plus from BBB-minus on Maryland Health & Higher Educational Facilities Authority's series 2001 bonds issued for the McLean School.

The outlook is stable.

"The downgrade reflects our assessment of a precipitous decline in enrollment over the past six years, particularly in the lower and middle schools," said Standard & Poor's credit analyst Carolyn McLean.

The school's headcount has decreased nearly 27% to 359 from a peak of 490 in fall 2006. With this decline in headcount, net tuition revenue has also fallen for the third year in a row. Furthermore, another decline in net tuition revenue is expected for fiscal 2013.

While management has continued to produce operating surpluses in the last few years, this unfavorable trend indicates a material weakening of financial and demand flexibility, leading to weaker overall credit strength.

Management has cut expenses to match the smaller enrollment and projects a weaker operating performance in fiscal 2013. Management states that if enrollment continues to decline at the same rate as in the past few years, it will likely make further expenditure cuts. The school's reputation and niche are a key credit strength, which if changed or affected by the cuts, could result in a further decline in enrollment.

The McLean School is an independent coeducational kindergarten through 12th-grade day school in Potomac, Md. The McLean School caters to students with different learning styles and learning needs; this does not include children with severe learning disabilities, but rather students who benefit from more tailored teaching styles and smaller classroom environments.

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