New York, November 29, 2012 --

Moody's Investors Service has downgraded to B3 from Ba3 the rating on Ashland University's ("Ashland") Series 2010 bonds issued through the Ohio Higher Educational Facility Commission. The rating was placed under review for further possible downgrade on September 10, 2012. The rating outlook is negative and we have concluded our review.

SUMMARY RATING RATIONALE

The downgrade of Ashland University's rating to B3 and negative outlook are based on our expectation that the university will continue to face severe liquidity pressure and a challenged market position as a heavily tuition-dependent private university in Ohio. The B3 rating also reflects the university's complex debt structure that includes variable rate demand debt, covenants, cross default provisions, bullet maturities, and interest rate derivatives. In addition, nearly all of Ashland's unrestricted funds secure bank loans placing the Series 2010 bonds in a subordinate position that could impact expected recovery if an event of default caused acceleration. The university's extremely thin unrestricted monthly liquidity provides very modest coverage of expenses and is inadequate to cover demand debt. The rating also reflects pressure on net tuition growth, thin debt service coverage, and enrollment declines.

CHALLENGES

*Insufficient monthly liquidity to cover demand debt with $8.1 million of unrestricted liquidity covering only 18.1% of demand debt and providing 34.2 monthly days cash on hand based on FY 2012 financials.

*Complex debt structure, which includes secured variable rate loans from three separate banks. Loans terms include financial covenants, cross default provisions, and bullet maturities. Further, nearly all of the university's unrestricted operating funds secure bank agreements, ultimately placing the Series 2010 bondholders in a subordinate position.

*Rising debt and frail balance sheet with $1.8 million of expendable financial resources, covering $88 million of debt and operating expenses each just 0.02 times in FY 2012. Debt has grown rapidly, above and beyond our earlier expectations for capital and borrowing needs.

*Stiff competition as a private university in Ohio, a state with many public and private university options, history as a teachers' college, and declining number of high school graduates are credit challenges given the university's high dependence on student charges of 86.8%.

*Extended schedule for receipt of pledges for capital projects with payment of some pledges over a 20-year period; pledge payment schedule extends beyond bullet maturity dates. The next bullet maturity date of approximately $18 million is on August 21, 2014 for a bank loan.

*Management turnover within the last two years in key areas of enrollment and fundraising.

STRENGTHS

*Management's ability to adjust expenses to substantially address a significant revenue shortfall due to an unanticipated 7.8% decline in fall 2011 enrollment generating 0.7% operating margin in FY 2012 based on financials.

*Favorable history of fundraising evidenced by a three-year average gift revenue of $9.8 million from FY 2010-FY 2012. We note that a large portion of the university's gifts are temporarily or permanently restricted. The university is planning a comprehensive campaign.

*The Series 2010 bondholders benefit from a cash funded debt service reserve fund, funded at MADS in FY 2012.

Outlook

The negative outlook reflects ongoing pressure on the university's market position, net tuition revenue growth (its primary revenue stream) and liquidity. It also reflects debt structure risks, refinancing risk of an expiring bank loan in 2014, and our expectation of a minimal threshold to its debt service ratio covenant in the near term given ongoing enrollment declines and reduction in net tuition per student.

WHAT COULD CHANGE THE RATING UP

Unlikely given the recent downgrade and negative outlook. Any upgrade would be driven by stable enrollment and net tuition trends coupled with significant growth of unrestricted liquidity, growth of headroom under financial covenant requirements, and reduction of demand debt

WHAT COULD CHANGE THE RATING DOWN

Violation of covenant requirements that may result in acceleration of all or a portion of debt; inability to refinance bank agreements; additional borrowing or further erosion or encumbrance of unrestricted liquidity; failure to receive gifts as planned; further declines in enrollment; continued stagnant or declining net tuition revenue or net tuition per student

PRINCIPAL RATING METHODOLOGY

The principal methodology used in this rating was U.S. Not-for-Profit Private and Public Higher Education published in August 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

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Erin Veronica Ortiz Analyst Public Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Kimberly S. Tuby VP - Senior Credit Officer Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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