Moody's Investors Service said it has upgraded to Caa1 from Caa2 the rating on the tuition revenue bonds of Birmingham-Southern College, Ala., issued through the private education building authority of the city of Birmingham.

The rating applies to the college's $26.3 million of outstanding Series 1996, 1997 and 2002 revenue bonds.

The rating outlook is stable.

The upgrade to Caa1 and stable outlook reflect the move to improved operating cash flow following deep expense cuts, ongoing donor support, and planned reduction in debt.

Other upgrade drivers include the move to a streamlined board structure as well the improved balance sheet composition through the elimination of endowment deficiencies. Credit challenges include the need to rebuild enrollment and student revenue, the need to sustain unrestricted gift support over several years, subordination of revenue bonds through bank debt, and high operating leverage. Additionally, the college's accreditation remains on Warning by the Southern Association of Colleges and Schools Commission on Colleges (SACS).

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