Moody's Investors Service said it has downgraded the rating to A3 from A2 on Georgia Perimeter College's Series 2005 revenue bonds (Academic Building -- Newton Campus Project) issued through the Newton County Industrial Development Authority's on behalf of Georgia Perimeter College Foundation Real Estate Newton, LLC.

The rating outlook has been revised to negative.

The rating action reflects an ongoing structural deficit at Georgia Perimeter College (GPC) which led to a substantial and unanticipated decline in the college's financial resource base in FY 2011 as well as a projected deficit of $9.5 million for fiscal year (FY) 2012 (absent advanced appropriations from the Board of Regents), and inconsistent operating performance.

The A3 rating reflects the Board of Regent's (BOR) broad lease revenue pledge, strategic importance of the bonded project to Georgia Perimeter College, and the BOR's recent intervention at GPC, which included replacing six senior managers, including the president, and a $9.5 million dollar supplemental appropriation in FY 2012.

The negative outlook reflects our expectation that the college will continue to have very thin flexible reserves over the next several years as they seek to balance operations; the likelihood of enrollment declines due to changes in admissions standards and recent negative media; and the upcoming, regularly scheduled accreditation visit from the Southern Association of Colleges and Schools (SACS) in September at a time when the college's financial reports will be showing material weaknesses.

The negative outlook also captures the college's variable rate debt structure risk with concentrated exposure to Wells Fargo Bank through a direct placement bank loan and an outstanding swap agreement with a deeply negative market value.

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