Moody's Investors Service lowered Roosevelt University's rating one notch to Baa3 as the Chicago-based school struggles with enrollment challenges.

The action, which puts the rating at the lowest investment grade, impacts $226 million of debt. The outlook is stable at the lower level.

The university has seen four years of declining enrollment forcing it to offer more financial aid which has limited tuition growth and strained operations and debt service coverage. It also added significant debt in recent years to fund a new downtown building.

"A history of weak operating cash flow is a key factor in the downgrade as the university has not yet begun paying principal on its Series 2009 bonds," analysts wrote.

The rating is supported by Roosevelt's market position as a comprehensive urban university with a variety of program offerings, a history of balanced operations, and healthy, though reduced monthly liquidity, Moody's added.

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