CHICAGO — The Moraine Valley Community College in Illinois lost its top credit marks ahead of its upcoming $9.2 million general obligation refunding.

Moody's Investors Service on Nov. 30 lowered the rating one level to Aa1 from Aaa on the school's $103 million of outstanding unlimited tax debt. The school's formal name is Community College District No. 524. The deal will refund 2006 bonds for present value savings of 13%.

The rating action reflects the constraints on the district's primary revenue sources given declining enrollment levels and limitations on tuition increases.

The university also relies on state aid, exposing it to the state's budgetary pressures that could result in spending cuts or a shift in the pension funding burden now covered by the state. Moody's recently dropped the state's GO rating to Baa1 from A3 and it carries a negative outlook.  The university also faces caps on its property tax levy.

In its favor, the college benefits from "considerable credit strengths including a substantial and economically diverse tax base located in the Chicago metropolitan area, strong financial position characterized by healthy reserves, and a manageable debt burden," Moody's said.

The college could restore its top marks if its tuition and state aid prospects improve but could be hit with further credit deterioration if its finances falter or it takes on a sizeable increase in debt or its pension liabilities resulting from a potential cost shift.

The college is located 25 miles southwest of downtown Chicago and serves 26 communities.

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