Life bond rating lowered further

MARIETTA ã Moody¼s Investors Services lowered Life University¼s 
underlying bond rati 
11/05/02


By Phillip Giltman
Marietta Daily Journal Staff Writer
 
MARIETTA ã Moody¼s Investors Services lowered Life University¼s 
underlying bond rating Sunday, saying the school¼s loss of its 
chiropractic accreditation threatens the survival of the institution.
„Moody¼s believes that Life will be hard-pressed to maintain enough 
enrollment to remain open unless it can regain accreditation and 
rebuild confidence among prospective students,¾ Moody¼s 
announced in a prepared statement.
Moody¼s also reported that Life¼s chiropractic student enrollment has 
plummeted to 865 ã a 65 percent decline from a high two years 
ago of 2,500 students.
Moody¼s noted that before the loss of accreditation in June, 1,400 
students were enrolled in the chiropractic program. The firm 
anticipates a further decline for January¼s winter quarter.
„Because of the severe enrollment declines, the financial viability of 
the university and its ability to service debt are in jeopardy,¾ 
Moody¼s said.
Moody¼s report also cited the Southern Association of Colleges and 
Schools sanctioning of Life in December 2001. SACS gave a one-
year extension to its accreditation and will decide whether to 
extend accreditation in December. The decision would affect the 
roughly 500 students enrolled in Life¼s nonchiropractic programs.
„If Life loses its SACS accreditation, its students cannot participate 
in federal financial aid programs, 
making it almost impossible for the university to stay in business,¾ 
Moody¼s said.
Life¼s interim president Dr. Michael Schmidt said last month that Life 
would remain financially viable even with the loss of the university¼s 
chiropractic program.
But Moody¼s stated Sunday, „The negative outlook is based on 
Moody¼s concern that the University will probably not be able to 
survive without CCE accreditation, the possibility of the loss of its 
SACS accreditation and the risk that liquidated assets could be 
insufficient to pay off the bonds.¾
Moody¼s reported that Life¼s bonds are also rated Aaa based on 
bond insurance from New York-based Financial Services Authority, 
but the underlying rating is based solely on the University¼s own 
credit factors.
Moody¼s lowered Life¼s underlying rating from Ba2 to B2. Moody¼s 
underlying rating applies to the $33 million in bonds Life received 
through the Marietta Development Authority in 1995.
Moody¼s reported that a source of potential liquidity if the school is 
forced to close is the sale of Life¼s land and buildings which has 
been marked at about $77 million. According to Moody¼s, the 
university has $16 million on hand as of September 30.
Gabriel Topor, an associate analyst at Moody¼s, said Life¼s 
underlying rating now sits three levels below investment grade and 
one level above junk status.
Junk bond status is the lowest ranking a bond can receive. It points 
to a severe lack of faith that an institution will repay its debts.
„The underlying rating is important because it reflects the true 
health of the institution,¾ Topor said earlier.
Because the bonds are privately backed, Marietta City Manager Bill 
Bruton said earlier that neither the city nor the Marietta 
Development Authority will be held liable if they fail.
The development authority issues bonds to local businesses for two 
reasons ã industrial development and educational expansion. As a 
public entity, the Marietta Development Authority can issue bonds 
with a lower interest rate than a traditional lender.
Life used the bonds for a number of campus improvement projects, 
including the purchase of apartments on Barclay Circle that now 
make up The Commons student housing.
Life was stripped of its chiropractic accreditation on June 10 and lost 
an appeal on Oct. 20 to lift the revocation.
Life officials said they expect to hear from the CCE later this month 
on whether they will be accepted as applicants for re-accreditation.
Schmidt said he hopes Life will be re-accredited by December 2003.
According to Moody¼s, the university is not actively exploring the 
option of merging with another accredited institution ‚ an idea 
floated by school administrators following the school¼s loss of 
accreditation.
Without accreditation, Life students are unable to take the national 
exams that are required for a chiropractic license.
Life spokesman Will Hurst said Tuesday the school won¼t release 
any further enrollment numbers until the CCE determines whether 
to accept the school as an applicant for accreditation.
On Oct. 23, the school reported 1,380 students remained in the 
chiropractic program. Moody¼s reported Sunday that chiropractic 
enrollment has dropped to 865.
pgiltman@mdjonline.com