Moody's Investors Service said it has downgraded to Baa1 from A3 the rating on Alma College, Mich.'s Series 2005 and 2008 bonds.

The outlook remains stable.

The downgrade to Baa1 was driven by a material deterioration in the college's financial resources and liquidity, and a trend of declining operating margins and cash flows over the last two years to narrow levels, providing thin debt service coverage.

The Baa1 rating also incorporates the college's satisfactory market position, fixed rate debt structure, heavy operating reliance on the student charges, and highly competitive student market, reflected by the elevated financial aid and declining freshman matriculation rates in recent years.

The rating outlook remains stable reflecting the expectation that the operating performance will improve in FY 2013, that there will be limited balance sheet growth in the near term, and that there are no major capital or debt plans in the next couple of years.

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