Standard & Poor's Ratings Services said it lowered its school issuer credit rating five notches to BBB-minus from A-plus on bonds issued for Pike County School Corp., Ind., by Pike County Multi-School Building Corp. The outlook is negative.

"The downgrade reflects our view of the district's persistent and sizable structural imbalances that are projected to continue at least through 2014," said Standard & Poor's credit analyst Anna Uboytseva.

At the same time, it affirmed the AA-plus long-term and underlying ratings on the previously issued bonds that qualify for Indiana's State Aid Intercept program. The strength and availability of state aid to intercept program participants supports the program's credit characteristics. The outlook on these ratings is stable.

The ICR rating reflects the school district's: currently large operating deficits that likely will continue through 2014;  reliance on the rainy-day fund to support operations; reliance on interfund borrowing and the tax anticipation notes for cash flow; declining enrollment, a fundamental factor in the state's allowance calculation; and continued financial pressures from rising costs and a lack of meaningful budget adjustments approved by the board.

Partially offsetting credit factors include the district's: proximity to the diverse Evansville economy; good-to-adequate income and wealth indicators; and moderate overall net debt burden coupled with no debt issuance plans and rapid debt amortization.

The school district is located in southwestern Indiana near Evansville.

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