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Rating Action: Moody's revises North Idaho College's outlook to negative; A1 issuer and A2 revenue bond ratings affirmedGlobal Credit Research - 15 Dec 2021New York, December 15, 2021 -- Moody's Investors Service has revised North Idaho College's outlook to negative from stable and affirmed the college's A1 issuer and A2 revenue bond ratings. The bonds, issued by the Dormitory Housing Commission of North Idaho College, have a final expected maturity in 2045. The college had $8.2 million of debt outstanding as of June 30, 2021.RATINGS RATIONALEThe revision of North Idaho College's outlook to negative primarily reflects governance credibility and board structure risks. These risks are highlighted by board dysfunction, with a small group of publicly elected board members and significant turnover at key senior leadership positions. Disputes between board members and with college leaders have been public, including the dismissal of the college's former president and complaints against the actions of the board. In response to recent complaints, the college's accrediting body is planning a visit to the college to assess these governance concerns as part of a review of the college's accreditation.Affirmation of the college's A1 issuer rating reflects the college's important regional role as a provider of two-year education in northern Idaho, healthy operating performance, growing wealth, and manageable leverage. For fiscal 2021, total cash and investments of $69.5 million cover debt and expenses a strong 8.5x and 1.2x, respectively, while unrestricted monthly liquidity of nearly $26 million provides an adequate 167 monthly days cash on hand. These financial strengths, in addition to remaining institutional aid from the federal government, provide the college with some stability as it seeks to stabilize enrollment amid ongoing governance issues.The affirmation of the A2 student fee revenue bond ratings incorporates the college's general credit characteristics, reflected in the A1 issuer rating, as well as instrument specific considerations, including a limited pledge of specific student fees and auxiliary revenues and active management of the pledge, including the availability of auxiliary fund balance to support debt service coverage. In recent years, the college has had to allocate a portion of available fund balance to make its debt service coverage covenant, but forecasts strengthening of net revenues for debt service.RATING OUTLOOKThe negative outlook reflects governance and management challenges that continue to weigh on the college's strategic position, including the upcoming accreditation review, and enrollment outlook.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Significant growth in financial reserves, including unrestricted liquidity- Material strengthening of market position, including successful stabilization of governance and management combined with increasing student demandFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Continued governance and management disruption leading to accreditation concerns, enrollment declines, inability to execute on strategic initiatives, or weakening of operating performance- Material spend down in reserves beyond current identified capital plans- For the student fee revenue bonds, inability to sustain stronger annual debt service coverage above 1.25x without use of reservesLEGAL SECURITYThe outstanding revenue bonds were issued by the Dormitory Housing Commission of North Idaho College, which is a blended component unit of North Idaho College. The bonds are payable from a mandatory student union fee, net revenues of the dormitory system, and net revenues of the student union building, as well as fund balances from these revenues and fees. The bonds have a rate covenant requiring the college to generate pledged revenues sufficient to generate 1.25x annual debt service coverage. However, in recent years, the college has needed to utilize a portion of accumulated fund balances to reach the 1.25x covenant. In fiscal 2021, pledged revenues were approximately $981 thousand, and the college designated $353 thousand in fund balance support in order to reach the 1.25x covenant. However, with declining annual debt service, the college does not anticipate the need to utilize fund balance support moving forward, projecting 1.4x debt service coverage in fiscal 2022.PROFILENorth Idaho College is a community college with its main campus located in Coeur d'Alene, ID, and serving a five-county region. The college offers over 80 academic programs including associates degrees, certificates programs, and career and technical education. In fiscal 2021, the college generated nearly $68 million in operating revenue and enrolled 4,577 students as of fall 2021.METHODOLOGYThe principal methodology used in these ratings was Higher Education Methodology published in August 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1257002. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.At least one ESG consideration was material to the credit rating action(s) announced and described above.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. 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