Standard & Poor's Ratings Services said it lowered its rating on New York State Dormitory Authority's revenue debt, issued for Brooklyn Law School (BLS), one notch to BBB from BBB-plus.
The outlook is stable.
The downgrade reflects Standard & Poor's opinion of BLS' significant net tuition revenue decrease and full-accrual deficits over the past three fiscal years due to enrollment decreases and a tuition discount rate that increased by 14% since fiscal 2010. In Standard & Poor's view, BLS' weaker credit profile is more commensurate with a lower rating. The rating service, however, believes the school's healthy and improved financial resource ratios support the BBB rating.
"We could lower the rating during the next two years if the school's enrollment were to decrease further; if the college were to generate larger full-accrual deficits, coupled with significant net tuition revenue decreases; or if financial resource ratios were to deteriorate," said Standard & Poor's credit analyst Emily Avila. "We believe a higher rating is currently unlikely during the next two years due to the college's significant full-accrual deficits, which have weakened the credit profile to levels commensurate with other BBB rated credits."
Although Standard & Poor's believes net tuition revenue and operating performance will likely remain pressured in fiscal years 2015 and 2016, the rating service recognizes what it considers the strong balance sheet currently provides a sufficient cushion.
In Standard & Poor's opinion, the maintenance of the current rating will depend on the college's ability to maintain stable enrollment and improve full-accrual operating performance in fiscal 2016 while it maintains financial resource ratios at or more than current levels.
