Moody's Investors Service said it has downgraded to Aa3 from Aa2 the ratings on Highline School District No. 401 (King County), Wash.'s parity debt, and assigned an underlying rating of Aa3 to the district's unlimited tax general obligation (UTGO) refunding bonds, 2012B.

The bond proceeds will refund certain maturities of the district's outstanding 2004 and 2006 UTGO bonds.

The bonds are secured by the district's full faith, credit and unlimited property tax pledge.

The outlook on the district has been changed to stable from negative.

The current offering will also receive the Aa1 enhancement rating of the Washington School Bond Guarantee Program, which currently carries a negative outlook and reflects the state's rating.

The downgrade of the district's underlying rating primarily reflects the district's weak financial performance relative to Aa2 rated issuers. The rating also incorporates the district's large tax base, average socioeconomic indicators, and a moderate debt profile.

The stable outlook reflects Moody's view that the district's general fund reserve levels will remain chronically low relative to its rated peers over the short-to-medium term but its financial operations will not significantly deviate from recent historical trends.

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