CHICAGO – A second rating agency has dropped Chicago-based Roosevelt University into junk territory over as enrollment struggles and a heavy debt load strain its balance sheet.

Moody's Investors Service lowered the school's rating on $180 million of 2009 bonds to Ba1 from Baa3 and $45 million of 2007 bonds to Ba2 from Baa3 in a report published Monday. The outlook remains negative.

"The downgrade reflects the university's weakening financial position driven by a second consecutive year of double-digit enrollment declines that will have a lasting impact on already weak operations and insufficient debt service coverage given heavy reliance on student-related income and very high fixed costs and financial leverage," Moody's said.

The ratings also incorporate the university's adequate liquid reserves, which give the school some time to implement new enrollment strategies and adjust expenses.

Both series of bonds have a security interest in gross revenues. While previously rated the same, the 2009 bonds' now higher rating reflects the added security of a mortgage in marketable real estate in downtown Chicago and a cash-funded reserve fund.

"Deterioration of the university's credit profile could result in further differentiation of the ratings between the two series of debt that would move the rating of the Series 2007 bonds further below that of the Series 2009 bonds," analysts said.

The university declined to comment on the downgrade.

The negative outlook reflects analysts' concerns over unstable student demand and the lasting effect of recent declines that will reduce revenue growth absent a strong rebound in spring enrollment, Moody's said. The outlook incorporates the expectation that the university will realize a bequest of $25 million in the near future.

Roosevelt University is a moderate sized private university founded in 1945 that offers undergraduate, graduate, and professional degree programs at its campuses in downtown Chicago, at a northwest suburb, and online.

Earlier this year, Fitch Ratings dropped its rating on the university's $225 million of outstanding debt to BB-plus from BBB-minus, and assigned a stable outlook. The downgrade "reflects the university's fifth consecutive year of negative operating margins, and another deficit projected for fiscal 2016," Fitch wrote at the time.

The university's enrollment has been uneven, limiting tuition growth, and it's reliant on student-generated revenues to cover 88% of operations. Enrollment declined in the fall of 2015 by 11% to 4,285 students. Management attributed the decline to admissions systems failures, Fitch said.

The school's balance sheet is strained by a high debt burden, with maximum annual debt consuming a high 15.7% of fiscal 2015 revenues. Debt service coverage is thin at 1.1 to 1.2 times, and "an escalating debt structure adds risk" as the maximum annual amount due rises to $19 million in fiscal 2021 from a current level of $16 million.

The not-for-profit school sold its debt in 2007 and 2009 through the Illinois Finance Authority, with much of it going to finance its new "vertical" campus building in downtown Chicago. The school turned to new leadership, which has been working to stabilize operations.

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