Moody's Investors Service has downgraded Hamline University's rating to Baa2 from Baa1 due to its highly leveraged balance sheet. The move affects $56 million of debt, including this week's $26 million issued through the Minnesota Higher Education Facilities Authority.
Hamline also has significant exposure to variable-rate debt and supporting letters of credit with financial covenants and is dependent on receipt of gift revenues to repay rapid amortization of debt.
In its favor, the university has an established market position in the Saint Paul-Minneapolis Twin Cities region, a good history of fundraising, and consistently positive cash-flow generation supporting debt service payments. Proceeds will help finance a new university center on the Saint Paul campus.