CHICAGO — Standard & Poor's outlook on the University of Minnesota Regents' rating has dimmed due to pressures posed by the state flagship school's increasing debt load.

In rating reports ahead of the school's $100 million mostly refunding sale next week, Standard & Poor's revised to negative from stable the outlook on its AA rating for the school's general obligation debt.

"The negative outlook reflects our opinion that increased debt issuance over time, coupled with weakness in financial operations, could pressure the debt ratings on UM," analyst Jessica Wood wrote.

The action impacts only about $10 million of taxable Series B bonds in the deal.

Proceeds will finance the design of health education and clinical research facilities to meet the needs of the Medical School and Academic Health Center on the university's Twin Cities campus.

The $89 million Series A carries the security of a state appropriation pledge. It was affirmed at AA, one level lower than the state' GO rating, and assigned a positive outlook to reflect the rating agency's revision of the state's outlook earlier this week to positive from stable.

That series will refund debt issued in 2006 to finance the university's football stadium.

UM plans an additional $260 million in new debt on top of its already elevated borrowing levels with its overall debt including state-supported bonds expected to hit $1.67 billion in fiscal 2017.

"At the same time, UM's financial results in fiscal 2014 were considerably weaker than in prior years with a full-accrual deficit on an adjusted basis, and preliminary expectations are for another full-accrual deficit for fiscal 2015," Wood added.

On the state-backed credit, Standard & Poor's said payments for debt service constitute a standing appropriation so the legislature would have to act not to appropriate for there to be an event of non-appropriation.

The deal carries split ratings from Moody's Investors Service. Moody's affirmed the university's own Aa1 rating and stable outlook on $1.4 billion of debt. It also affirmed the Aa2 and stable outlook assigned to the state-supported bonds, a rating that is notched one level below Minnesota's Moody's rating.

The university was founded in 1851 and enjoys a national market position as the state's flagship and land grant university and a Big 10 conference member with revenues of more than $3 billion and an enrollment of more than 30,000 students at its campuses in the Twin Cities, Duluth, Crookston, and Rochester.

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