CHICAGO — Moody's Investors Service dropped Minnesota-based Amherst H. Wilder Foundation's rating by two levels to A3 citing fiscal struggles that have led to endowment draws.

The rating agency also warned of the potential for further credit deterioration by leaving a negative outlook on the rating. The A3 rating, down from A1, applies to $26 million of rated debt. The foundation's bonds mature in 2036 and were sold through the St. Paul Port Authority.

The foundation has suffered "continued operating deficits requiring elevated supplemental endowment draws," Moody's said. "The rating additionally incorporates the foundation's high reliance on its endowment and exposure to investment volatility."

The credit profile benefits from the foundation's financial resources that provide good coverage of both debt and operations while management works through operational challenges.

"The negative outlook reflects expectations of continued operating stress as the endowment spend rate is slowly reduced. Additionally, investment market volatility could add further pressure to the organization's balance sheet strength," Moody's warned.

The foundation operates in the St. Paul area providing children's residential services, mental health and education, early childhood development, supportive housing and employment services, and elderly community services; it also has a research division. In fiscal 2016, the foundation is expected to serve nearly 11,000 people with the help of 2,200 volunteers, Moody's said.

The foundation's debt is an unsecured general obligation with the foundation pledging to maintain debt service coverage of 1.1 times and a ratio of unrestricted net assets to indebtedness of 2 times. Coverage of both exceeded requirements in fiscal 2014. There is no debt service reserve fund.

The foundation issued debt in 2006 to finance construction of the new Wilder Center, which serves as a central facility for its various programs and initiatives.

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