Moody’s Investors Service has downgraded Monmouth College by one notch to Baa3, the lowest investment-grade level, and assigned a negative outlook as the school grapples with a weakening market position and operating pressures.

The drop affects $3.5 million of rated debt issued in 2000 through the city of Monmouth.

Analysts attributed the action to pressure on enrollment along with a highly competitive market environment, tightening of operating performance, an increase in variable-rate debt with cross-default provisions, and thin liquidity.

“The negative outlook reflects weakening in the market position evidenced by enrollment declines and pressure on the college’s operating performance,” analysts wrote.

Student tuition, fees, and auxiliaries represent 80% of operating revenues and the college has seen two years of enrollment declines. About 88% of the college’s debt is in a floating-rate mode, including a $10 million tax-exempt bank-qualified loan that the college entered into with PNC Bank in August. The school’s strengths include favorable operating performance, growth in its financial resources and relatively new infrastructure.

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