College of New Rochelle Dropped to Junk

Moody’s Investors Service downgraded the College of New Rochelle’s bonds to Ba1 from Baa3.

Moody’s action on Wednesday affects $58.5 million of debt.

The action was due to a 21% decline in full-time equivalent enrollment to fall 2012 from fall 2008, among other things.

The college also has “very low” unrestricted monthly liquidity, wrote Moody’s analyst Erin Ortiz and vice president Edith Behr.

The college also has debt structure risks, with a high amount of variable rate demand debt and a letter of credit “that contains financial covenants and exposes the college to remarketing and liquidity facility renewal risk.” The letter expires in August.

For positives, the Moody’s analysts pointed to continued growth in net tuition per student. This has grown 42% over five years. The analysts also noted that many of the school’s faculty members are adjuncts, which makes it easy for the school to expand or contract its payroll.

Moody’s maintains a negative outlook on the college. Among the reasons is a competitive market for attracting students.     

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