Moody's Investors Service said it has downgraded Ashland University, Ohio's rating to Ba3 from Ba1.

The rating remains under review for possible further downgrade.

Ashland's rating was first placed under review on June 5. The current action affects approximately $37 million of Series 2010 bonds issued through the Ohio Higher Educational Facility Commission.

The downgrade reflects a higher debt burden than anticipated and weakened cash flow, causing a potential covenant violation which could result in acceleration of the university's debt. In addition, the downgrade reflects very thin liquidity that is insufficient to cover demand debt, a weakening balance sheet, steep decline in net tuition revenue based on unaudited FY 2012 financials, and projections of another decline in total enrollment in fall 2012.

The review will focus on cash flow projections specifically as it relates to scheduled debt service, the outcome of discussions between the university and one of its private lenders regarding a potential covenant violation, and an update on enrollment for the fall 2012 semester. The review period is expected to conclude within 15 days.

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