Moody's Investors Service said it has downgraded Franklin Pierce University's rating to B3 from B1 on the Series 1998 and 2004 bonds and to Caa1 on the Series 1994 bonds issued through the Hampshire Higher Education and Health Facilities Authority.

The rating outlook remains negative.

The downgrade of Franklin Pierce's rating on the Series 1998 and 2004 bonds to B3 with a negative outlook is based on a challenged student market position and heavy reliance on student charges, extremely thin unrestricted liquidity, weakening operating performance and debt service coverage by Moody's calculation, declining net tuition revenue and weak fundraising.

The rating also reflects dependence on a secured operating line of credit for cyclical cash flow and significant leverage. The line of credit has a short maturity, requiring the university to seek renewals every six months.

The downgrade of the Series 1994 bonds to Caa1, one rating notch lower than the Series 1998 and 2004 bonds, reflects lack of a debt service reserve fund given the university's low liquidity and challenged revenue raising ability to support debt service. As of June 30, 2012, Franklin Pierce had $2.5 million of Series 1994 bonds outstanding. They mature in 2019.

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