Bard College in New York's Dutchess County was downgraded further into junk territory Wednesday.
Moody's Investors Service downgraded the school's revenue bonds one notch to B1 with a negative outlook, citing increased debt levels.
The drop from Ba3 impacts $131 million of Bard revenue bonds issued in 2007 by the Dutchess County Industrial Development Agency and the Massachusetts Development Finance Agency.
Moody's analyst Dennis Gephardt said the private liberal arts school has struggled with debt related to the purchase of a historic site adjacent to its Annandale-on-Hudson, N.Y. campus.
The college is also hampered by the violating of covenants in bank agreements during the 2016 fiscal year along with a $4 million settlement with the U.S. Department of Justice, according to Moody's.
The college
"The ongoing depletion of liquidity and increased exposure to bank agreements heightens the prospects for a liquidity crisis in the absence of extraordinary donor support," said Gephardt. "With a cash flow from operations insufficient to cover debt service, prospects for a material increase in liquidity apart from collecting pledges receivable or benefitting from additional gifts remain slim."
Moody's said repayment of the revenue bonds is an unsecured general obligation of Bard College. The debt issued by the Dutchess County Industrial Development Agency financed capital projects on Bard's main campus in New York's Hudson Valley. The Massachusetts Development Finance Agency issued $4 million to refund previously sold debt for Bard College at Simon Rock, an early college experience program for high school age students in Great Barrington, Mass.
Gephardt noted that the school boasts "strong donor support" and "sound student market position." He added that the Bard Graduate Center benefits from an external trust that held $111 million in investments as of June 30, 2016.
Bard has an enrollment of more than 3,000 on its Dutchess County campus 90 miles north of New York City. The college recently acquired the Longy School of Music in Cambridge, Mass., and Bard College Berlin, a liberal arts university known for an intensive program in intellectual history.
