Moody's Investors Service said it has downgraded to A2 from A1 the underlying rating on Farmington ISD 192, Minn.'s outstanding general obligation debt.

Moody's has assigned an A2 underlying rating and Aa2 enhanced (MSDE) rating with a negative outlook to the district's $2.3 million general obligation alternate facilities bonds, Series 2013A.

Post-sale, the district will have $206 million in general obligation debt, of which $201 million is Moody's rated.

The Series 2013A bonds are secured by the district's general obligation unlimited tax pledge. Proceeds of the bonds will finance health and safety projects included in the five year health and safety plan of the district.

The downgrade to the A2 rating reflects the district's narrow financial position with challenged liquidity, medium-sized tax base near the Twin Cities, and elevated debt levels.

The enhanced Aa2 rating and negative outlook is due to the additional security provided by the State of Minnesota's School District Credit Enhancement Program (MSDE). Under the MSDE loan program, established and designed by the State of Minnesota, the bonds are secured by the state's pledge of an unlimited appropriation from its General Fund (the state's general obligation debt is rated Aa1 with a negative outlook) should the district be unable to meet debt service requirements.

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