Standard & Poor's Ratings Services said it lowered its rating to BBB-minus from BBB on the Puerto Rico Industrial, Tourist, Educational, Medical, and Environmental Control Facilities Finance Authority's series 2012 higher education revenue bonds, issued for the University of the Sacred Heart (USH; Universidad del Sagrado Corazon).
The outlook is stable.
"The downgrade reflects our view of USH's continued enrollment decreases," said Standard & Poor's credit analyst Emily Avila, "which have accelerated in fall 2014 and which we expect to persist during the next two years."
The sharp enrollment decrease will likely pressure fiscal 2015 operations and without improvement, could pressure fiscal 2016 operations as well. USH's expected full-accrual deficit in fiscal 2015 and financial resource ratios which are still below average result in a weaker financial profile more commensurate with other BBB-minus rated institutions.
"We believe that the university's high student fee dependence and heavy reliance on Pell and similar grants for tuition revenue makes it vulnerable to economic conditions beyond its control," she added.
"The stable outlook reflects our expectation that USH will maintain financial resource ratios at or near current levels," added Avila, "while working to stabilize enrollment at or near current levels and improve operations on a full-accrual basis."
