Bellarmine University was downgraded to B1 from Ba3 by Moody's Ratings, affecting about $60 million of outstanding debt. The outlook is negative.
The downgrade on the Kentucky-based school stemmed from declining enrollment, persistent use of reserves, and expectations that operating deficits will continue "absent swift strategic actions with significant results," Moody's said.
The university's reliance on reserves is depleting its unrestricted liquidity, the agency said in its report Wednesday.
The school had an unanticipated decline in fall enrollment following an increase in fall of 2023. The region is experiencing weak demographic trends and evolving consumer trends, which both adversely impact enrollment.
Moody's cited the school's reliance on pre-funding of debt service to meet bond covenants as a negative.
The university's aging facilities are also a concern, according to Moody's.
"While the university recently hired a consultant and continues to work through a strategic plan focused on increasing enrollment and retention to support operating stability, these plans present substantial execution risks amid a highly competitive environment," Moody's said.
Bellarmine is a private liberal arts school located in Louisville, founded in 1950 as a Catholic school, that enrolled 2,756 fulltime equivalent students this fall. It offers undergraduate, graduate and professional degrees.
The school's Series 2015, 2017A and 2017B bonds, issued by Louisville & Jefferson County Metropolitan Government, have a lien and security interest on gross revenues. The bonds are also secured by a mortgage pledge on some campus facilities and a debt service reserve fund.
Earnings before interest, depreciation and amortization in the last three fiscal years have produced debt service coverage between about 0.2% and negative 0.4% levels, which Moody's describes as very weak.
For positives, Moody's noted Bellarmine is established in Louisville with notable and expanding programs and partnerships, particularly oriented toward health professions. It also has historically benefited from good donor support.
A spokesman for Bellarmine University didn't respond to a request for a comment.
The other ratings agencies don't rate the university's bonds.
