CHICAGO - A review by Moody's Investors Service of higher education credits in Minnesota has resulted in three downgrades, three upgrades, and six rating confirmations, the rating agency said Monday. Moody's also issued three new ratings.

John Nelson, assistant vice president in the higher education rating group at Moody's, said that while colleges and universities in Minnesota are "generally well managed," many suffer from weak endowments.

St. Olaf College was downgraded to A from Al, while the ratings for Bethel College and St. Catherine College were dropped to Baa from A. The downgrades affected a total of about $25 million of outstanding debt.

Nelson said the downgrade of St. Olaf College's rating was due to the lack of a "sizable" operating surplus. "The previous A1 rating was not commensurate nationally with the level of liquidity on balance sheets," Nelson said. The college "is not running deficits, but has no generally sizable operating surpluses."

The ratings for Bethel and St. Catherine colleges were lowered because of the lack of substantial endowments and because of competitive pressures from other institutions, Nelson said. He said that the two credits had not been reviewed for several years.

The three upgrades, which occurred over the summer, affected a total of about $354 million of debt. The University of Minnesota was upgraded to Aa from A1 because of its large endowment, strong state support, available funds, and research facilities, Nelson said.

The University of St. Thomas' rating was hiked to A1 from A because of the university's success in expanding its graduate program, while Concordia College was upgraded to A from Baa1 because of its strong balance sheet and low debt levels, Nelson said.

Moody's confirmed an Aa rating for $26.6 million of Carleton College's outstanding debt, which includes $2.3 million of debt that had been rated Aa1 because of funds that had been set aside for debt service. Nelson said the set-aside funds were no longer recognized as "a significant enhancement" to that debt.

Other confirmations were an A rating for Minnesota State University, a Baa l rating for Hamline University, and Baa ratings for St. Scholastica College, St. Mary's College, and St. Benedict College.

Moody's also issued new ratings of Aa for Macalester College, Baa 1 for Gustavus Adolphus College, and Baa for Augsburg College.

In a press release, Moody's said the state provides "substantial funding" for higher education. Public institutions receive direct appropriations, while Minnesota students attending both public and private institutions in-state are eligible for financial aid grants.

The Moody's review marks the second evaluation of higher education credits for the rating agency. This summer, the agency reviewed colleges and universities in Massachusetts. Nelson said other state reviews will be conducted next year.

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