Moody’s Investors Service last week dropped its rating to A1 from Aa3 on Michigan Technological University, affecting just under $80 million of outstanding debt. The outlook was revised to stable from negative at the lower rating.

The downgrade comes as the university is expected to come to market this week with $13.4 million of general revenue refunding bonds.

“The downgrade to A1 is driven by consistently unfavorable operations, weak cash flows, and thin balance sheet relative to rated peers, that are not expected to improve materially over at least the medium-term,” Moody’s said in a release. The school also faces enrollment challenges, analysts said.

On the positive side, the school has a stable market position in the Upper Peninsula with a niche in engineering and applied sciences, the ratings agency said. Fall 2012 enrollment totaled 6,456 students, a 1.7% decline from 2011.

State cuts pose another challenge for the university. State appropriations in fiscal 2012 were reduced by 15%, declining to a total of just under 20% for operating revenues, down from 26.2% in fiscal 2008, according to Moody’s.

“The stable outlook reflects the expectation that both operations and financial resources will not change materially over the next few years as enrollment stabilizes or grows due to several initiatives to expand program offerings and expand recruitment of students in concert with long-range enrollment growth targets, and with continued state support at stable levels,” Moody’s said.

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