CHICAGO — The Board of Trustees for the Minnesota State Colleges and Universities system takes competitive bids Wednesday on $78 million of new money and refunding bonds.

The system's fiscal struggles prompted one rating agency to warn of a possible rating downgrade ahead.

The sale includes a $36 million tax-exempt series of revenue fund bonds and a $42 million taxable series. Springsted Inc. is advising the system on the issue.

Proceeds of the A series will refund 2005 paper and fund capital improvement at a two-year community college while the B series proceeds will finance improvements at four-year schools and cover interest on the bonds for an initial period.

Ahead of the sale, Moody's Investors Service affirmed the system's Aa2 rating while revising its outlook to negative from stable on a total of $340 million of debt. The action reflects Moody's "expectation of further deterioration of coverage for the already narrow pledge" on the systems' revenue fund bonds.

"Declines in full time equivalent enrollment will continue to pressure performance of the revenue fund and overall system operating performance," Moody's warned. The system is also hurt by a limited ability to grow its revenues due to a state mandated tuition freeze.

The Aa2 reflects MnSCU's significant economic impact as the largest provider of post-secondary education in the state. It also reflects good financial reserves and moderate financial leverage. The system consists of seven universities and 24 community, technical and comprehensive colleges. It enrolls nearly 57% of all Minnesota undergraduates.

Standard & Poor's affirmed MnSCU's AA-minus rating and stable outlook. The rating "reflects our view of MnSCU's solid student demand metrics… despite some recent declines in full-time equivalents; positive system operations, with operating surpluses in each of the past four fiscal years on a cash basis; and a manageable debt burden," analysts wrote.

Gov. Mark Dayton did not include new funding for the system in his proposed fiscal 2016-17 budget as he called on the administration to resolve a dispute with faculty members who have cast no confidence votes against the systems' chancellor. The faculty groups are opposed to changes proposed by Chancellor Steven Rosenstone in a long-term strategic plan.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.