WASHINGTON - Growing mark-to-market liabilities for interest rate swaps are posing credit risks that could result in downgrades for some not-for-profit hospitals, higher education institutions, and other nonprofit borrowers, Moody's Investors Service warned in a report issued yesterday.

Over the last few months, most borrowers have seen the fair value of their swap agreements decline significantly, which in some cases has required them to post significant amounts of collateral, Moody's said. The collateral postings, combined with poor investment returns over the last year and deteriorating operating results, has left some borrowers unprepared for a sudden drain on liquidity that swap liabilities can cause.

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