Moody's Investors Service said it has downgraded to Baa3 from Baa2 the rating on Regent University, Va.'s Series 2006 revenue bonds.
The outlook is negative.
The downgrade reflects the sustained decline in the university's financial resources, stagnant net tuition revenue and enrollment softness in the law school. The bonds were issued through the Virginia College Building Authority.
The downgrade to Baa3 reflects the university's ongoing decline in cash and investments, stagnant net tuition revenue, declining law school enrollment, willingness for endowment spending to materially exceed 5%, and ongoing use of a secured line of credit and related collateral requirements that reduce liquidity.
In addition the action incorporates Regent's high operating leverage and limited fundraising.
The negative outlook reflects the possibility that extraordinary endowment spending could further deplete the university's investments and student market pressures could make achieving operational equilibrium more difficult.
The Baa3 rating is supported by still considerable, relative to the rating category, financial resources providing the university with time to continue to align its business model.
