Moody's Investors Service said it has downgraded to Baa3 from Baa1 the rating assigned to Morehouse College, Ga.'s Series 2007 bonds issued through the Development Authority of Fulton County.
The outlook is negative.
The downgrade to Baa3 with a negative outlook is based on Morehouse's structural deficits, with insufficient cash flow from operations to cover debt service; ongoing enrollment declines; and weak liquidity with financial performance that will remain compressed through at least fiscal year (FY) 2015.
Fiscal 2015 will be the first full year MHC's new senior leadership team will be in place to see the results of its strategies to stabilize enrollment, operations and the balance sheet profile. The negative outlook reflects the probability of a further downgrade should the college be unable to improve cash flow and debt service coverage in FY 2015 and beyond or if there is a further decline in liquidity or enrollment.
Despite these challenges, the Baa3 rating remains supported by Morehouse's position as one of the nation's leading historically black colleges, solid gift support, overall improvement in broader financial resources and minimal debt structure risks.
