Moody's Investors Service is reorganizing its public finance department to create a higher education rating group.

Through the new group, Moody's will establish a national focus for credit analysis of about 400 colleges, universities, and higher education authorities it rates, said Howard J. Cure, a vice president at the firm who will be in charge of the higher education group.

Due to the challenges facing colleges and universities on a national scale, it made sense to concentrate on higher education as a separate rating group, Cure added. Currently, higher education bond issuers are rated on a geographical basis by analysts in each of the agency's eight regional rating groups, he explained.

Daniel Heimowitz, executive vice president and managing director of Moody's public finance department, said the new rating group does not signal a larger reorganization of the public finance department.

Instead, Moody's decided to form a higher education group because higher education credit analysis "really doesn't fit with the other things the regional rating groups do," Heimowitz said.

Private universities see little impact from the actions of local municipalities and must be rated based on how they compare with comparable institutions throughout the country, he said.

Higher education institutions now face problems that are national in scope and transcend local government issues, Cure said. For example, private universities are seeing cuts in federal appropriations for research grants and financial aid.

In addition, state universities that expanded during the 1980s now must reduce faculty, student services, and some academic programs because of financial problems, he added.

The higher education group, expected to be formalized early next year, will be headquartered in New York City. Moody's has not determined how many credit analysts will be assigned to the group, Cure and Heimowitz said.

The agency's current regional rating groups are divided according to U.S. Census Bureau tracts: the New England. Mideast, Southeast, Great Lakes, Plains, Rocky Mountain, Southwest, and Far West regions.

In addition, the firm has rating groups devoted to states, structured finance, asset-backed, credit supported and health-care finance, and bond insurance.

In comparison, Standard & Poor's Corp. assigns ratings based on the type of security, such as utility revenue bond, health care, transportation, education, and general obligation. In addition, the general obligation bond group is divided into three geographical regions - eastern, central, and western - with analysts assigning ratings to the GO bonds of all municipalities within its regional group.

Earlier this year, Moody's also made some changes within its regional ratings groups, creating nine subgroups that focus on specific types of bonds or a financing structure.

The nine subgroups are public power, water and sewer, solid waste/resource recovery, airports, ports, mass transit, toll roads, commercial paper/variable- rate demand obligations, and state revolving funds/pools.

"We've always had people who because of their interest or background had a special focus," said Heimowitz. "This is a formalizing of some things that strengthen a commitment that we've always had."

Analysts who work in each of the subgroups continue to cover a spectrum of other issues in each of their geographic groups. However, subgroup members will also do credit analysis on a national scope and develop special reports for the agency in those areas.

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