Moody's Investors Service last week affirmed its B1 rating and negative outlook on Detroit Public Schools, saying the district has seen improved financial results in 2011 and 2012, but still faces serious challenges.

DPS, which is under emergency management, has $2.1 billion of long-term outstanding debt.
The district's 2011 sale of deficit bonds stabilized its general fund position but elevated its debt burden, Moody's said.

In addition to a heavy debt burden, the district faces falling enrollment and fallout from the city of Detroit's own economic problems.

On the plus side, operations improved in 2011 and are expected to again in 2012 and the current management is using so-called zero-based budgeting. The state's oversight is also considered a credit positive.

"Affirmation of the negative outlook reflects our opinion that the district's operations will remain extremely pressured, given further expected enrollment losses and revenue declines," Moody's said.

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