Standard & Poor's Ratings Services said it has lowered its long-term rating to BB from BB-plus on Maryland Health & Higher Education Facilities Authority's series 2001 bonds issued for the McLean School.
The outlook is negative.
"The downgrade reflects the continued decline in enrollment over the past seven years and projected deficits through fiscal 2016," said Standard & Poor's credit analyst Debra Boyd. "The school's headcount continued to decrease in fall 2013 by 6.8% to 330 students from the prior year and a 30% decrease since fall 2008. With a decline in headcount, net tuition revenue has also fallen for the fourth year in a row although management expects an increase in enrollment and tuition revenue growth in fall 2015. The deficits are the result of management's decision to make strategic investments in technology, capital, faculty, and outreach after many years of expense cuts to increase the school's marketability, attract new students, and reduce attrition" added Boyd.
The school is forecasting deficits through fiscal 2016, increasing the school's financial vulnerability and reducing its overall credit strength in the short term. However, we believe that management's decision to reinvest in the school is necessary and could result in credit positives in the long-term if successful.
The McLean School caters to students with different learning styles and learning needs; this does not include children with severe learning disabilities, but rather students who benefit from more tailored teaching styles and smaller classroom environments. The unique staff required to achieve this mission includes learning specialists, speech-language pathologists, occupational therapists, and registered nurses.
