CHICAGO—Chicago-based Roosevelt University is at risk of losing its investment-grade rating from Moody's Investors Service as it struggles with enrollment loses.

The rating agency on Dec. 1 revised the outlook on its Baa3 rating to negative.

The action impacts $225 million of debt issued in 2007 and 2009 through the Illinois Finance Authority.

"The revision of the outlook to negative is driven by a significant enrollment drop for fall 2015 that will pressure the university's already thin operations and will necessitate the use of reserves to help plug the budget gap," according to Moody's.

The Baa3 rating is supported by Roosevelt's sizeable scale and scope with operating revenue of more than $120 million. It also benefits from its position as a comprehensive urban university in Chicago.

The university faces tough competition for students, resulting in falling enrollment which has pressured net tuition revenue growth. Negative factors also include its heavy reliance on student charges and high financial leverage.

The university could lose its investment-grade rating if unable to grow revenue by stabilizing enrollment, it relies too heavily on reserves, or sees a larger than anticipated deficit in the current fiscal year.

The university could gain ratings ground by generating at least balanced operations and additional cash flow to provide stronger debt service coverage and if its sees sustained strengthening of student demand and net tuition revenue growth.

Roosevelt University is a private university founded in 1945 with enrollment of nearly 4,600 full-time students. It operates programs at campuses in downtown Chicago and in suburban Schaumburg, as well as online.

The university has been strained by its debt load in financing a new downtown building.

The university's 2009 bonds enjoy a cash funded debt service reserve and a mortgage pledge but the 2007 bonds do not.

"Deterioration of the university's credit profile could result in a rating differentiation between the two series of debt that would move the rating of the Series 2007 bonds below that of the Series 2009 bonds," Moody's said.

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