Moody's Investors Services has downgraded to Baa1 from A2 the rating on the Kimball Independent School District 739, Minn.'s general obligation unlimited tax debt and assigned a negative outlook.

The Baa1 rating and negative outlook applies to $5.8 million of outstanding general obligation debt.

The bonds are secured by the district's general obligation unlimited tax pledge. The Baa1 rating incorporates the district's challenged financial position evidenced by four years of consecutive operating deficits and a negative fund balance in fiscal 2012; a limited tax base of $571 million with average wealth levels; and a manageable debt burden with rapid principal amortization.

The negative outlook reflects Moody's expectation that operations will continue to be challenged due to declining enrollment and limited financial flexibility.

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