Allegany College Housing LLC, MD 2014 Student Housing Bond Rating Cut To 'BB+' On Lower Occupancy; Outlook Negative

CHICAGO (S&P Global Ratings) Jan. 29, 2019--S&P Global Ratings lowered its 
long-term rating on Maryland Economic Development Corp. (MEDCO)'s series 2014 
student housing revenue refunding bonds, issued for Allegany College Housing 
LLC (ACH) to 'BB+' from 'BBB-'. The outlook is negative. ACH is a 
not-for-profit corporation organized for the sole purpose of constructing 
student housing for the Allegany College of Maryland (ACM).

The downgrade and negative outlook reflect our opinion of decreases in 
occupancy from about 100% for seven years to 90% in fall 2017 and 81% in fall 
2018, as well as a projected debt service coverage (DSC) of 1.1x annual net 
revenue according to ACH's debt service calculation. The lower coverage would 
violate a covenant to keep annual DSC above 1.25x; however, it would not 
constitute a default as long as ACH's annual DSC is above 1.0x and the college 
agrees to hire a financial consultant per the borrower's request. We expect 
sustained pressure on occupancy that will continue to pressure ACH's ability 
to remain above 1.0x coverage, although management has indicated the college 
could be willing assist ACH's meet its covenants.

The negative outlook reflects our expectation that occupancy will likely 
continue to decrease and ACH could fail to generate DSC above 1.0x. We 
anticipate that the college will continue to support the project; however, 
because there is no obligation to so, we view this is as an additional risk, 
should the college chose to not dedicate resources to ensure the project meets 
its obligations. 

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