Standard & Poor's last week downgraded Hampton University to A-minus from A-plus based on increasing debt and business risk related to the university's Proton Therapy Institute.

The PTI, still under construction, is a cancer center that will use proton beam therapy, which can serve as a more exact way to combat certain cancers.

But the expansion has come at a difficult time for the Hampton-based university. Enrollment has declined 14% to 5,402 from a peak of 6,309 in the fall of 2005.

Investment losses hurt the university's financial performance. Unrestricted net assets declined 11% in fiscal 2009 as the endowment fell by 17% to $202 million. Management expects balanced operations for fiscal 2010, which ends in June.

The university in August issued $54 million of bonds for the PTI, leaving it with about $237 million of total debt outstanding. That represents a maximum annual debt service of 11% of fiscal 2009 adjusted operating expenses, which Standard & Poor's analysts deem high.

The PTI bonds are currently paying interest only and will begin paying full debt service in 2014.

Proton therapy can be an alternative to radiation for cancer treatment. According to Hampton's Web site, it can spare the body from some tissue damage compared to x-ray radiation and result in fewer side effects. Currently, there are five proton centers open in the U.S. and eight more are expected to open.

Construction began on the institute in 2007. The facility expects to receive patients this year. When completed, it will be the largest free-standing proton therapy institute in the world, according to Hampton's Web site.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.