The Ohio Higher Educational Facility Commission is set to enter the market this week with $180 million of revenue bonds on behalf of Case Western Reserve University to refund its outstanding 2004 auction-rate debt.

Roughly $127.5 million of the issue is structured as variable-rate demand bonds backed by letters of credit from Bank of America NA and Allied Irish Bank PLC. The remaining $52.8 million will be issued as fixed-rate bonds.

Moody’s Investors Service assigned an A1 rating with a stable outlook to the upcoming issue, and affirmed its A1 rating on the university’s $555 million in outstanding debt. Standard & Poor’s assigned a AA-minus rating to the upcoming issue and affirmed its AA-minus underlying rating on the outstanding debt. Standard & Poor’s also affirmed its negative outlook on the credit, reflecting continued operating deficits. After the refunding, about 44% of Case Western’s debt will be in variable-rate mode.

Noting Case’s strengths as a leading research institution and a strong liquidity position — $1 billion in unrestricted resources in fiscal 2007 — Moody’s analyst Kimberly Tuby said she expects the Cleveland-based school to maintain its strong academic reputation and fiscal flexibility. But a recent decline in gift revenue and ongoing operating deficits, including one anticipated for fiscal 2008, are among the university’s challenges.

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