New York, December 07, 2012 --

Moody's Investors Service has downgraded Franklin Pierce University's ("Franklin Pierce") rating to B3 from B1 on the Series 1998 and 2004 bonds and to Caa1 on the Series 1994 bonds issued through the Hampshire Higher Education and Health Facilities Authority. The rating outlook remains negative.

SUMMARY RATING RATIONALE

The downgrade of Franklin Pierce's rating on the Series 1998 and 2004 bonds to B3 with a negative outlook is based on a challenged student market position and heavy reliance on student charges, extremely thin unrestricted liquidity, weakening operating performance and debt service coverage by Moody's calculation, declining net tuition revenue and weak fundraising. The rating also reflects dependence on a secured operating line of credit for cyclical cash flow and significant leverage. The line of credit has a short maturity, requiring the university to seek renewals every six months.

The downgrade of the Series 1994 bonds to Caa1, one rating notch lower than the Series 1998 and 2004 bonds, reflects lack of a debt service reserve fund given the university's low liquidity and challenged revenue raising ability to support debt service. As of June 30, 2012, Franklin Pierce had $2.5 million of Series 1994 bonds outstanding. They mature in 2019.

CHALLENGES

*Difficulty of a relatively young private university to establish a presence and reputation in a crowded and highly competitive higher education market challenged by limited fundraising and small endowment, operating base and enrollment.

*Heavy reliance on student charges, comprising 95% of Moody's adjusted operating revenue and very weak fundraising (less than $1 million of total gift revenue in FY2012). This high reliance is a particular challenge given three consecutive years of declining net tuition revenue, leading to a negative operating margin in FY 2011 and FY 2012 by Moody's calculation. The university's regional student draw coupled with a low freshmen to sophomore retention rate (approximately 63%) challenges the university to grow enrollment.

*Extremely thin unrestricted monthly liquidity, with $2.3 million of unrestricted liquidity covering only 60% of demand debt and providing 19.1 monthly days cash to cover operating expenses based on FY 2012 financials. The university relies on draws on the line of credit for seasonal cash flow.

*Decline in financial resources attributable to investment losses and a $2.3 million draw on cash for capital renovations leaving the university with negative $2.1 million expendable financial resources in FY 2012, down from $403,000 in FY 2011.

*Reliance on an operating line of credit for seasonal cash flow with relatively short renewal periods of six months. If the bank decides not to renew the line of credit, all principal and accrued interest outstanding would be due and payable by expiration. Based on FY 2012 results, the university also has a thin cushion to its covenant requirements.

STRENGTHS

*Enrollment grew nearly 3.0% in fall 2012 to 1,991 full-time equivalent (FTE) students from 1,935 students in fall 2011 driven by undergraduate enrollment on its main campus in Rindge, New Hampshire. The university's enrollment has diversified with approximately 80% undergraduate in fall 2012 compared to 90% undergraduate in fall 2008. Despite this enrollment growth in fall 2012, fall 2012 FTE represents a 6% decline over fall 2008 FTE.

*Bondholders of the Series 1994, 1998, and 2004 bonds benefit from a mortgage pledge and the Series 1998 and 2004 bonds are further secured by a cash funded debt service reserve fund.

*Management engaged in a comprehensive strategic plan focusing on recruitment and retention, as well as an assessment of programs across all of its campuses.

*No additional borrowing plans and management does not anticipate drawing down financial resources. All of the university's rated debt is fixed rate.

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 refinancing risk of an expiring bank line of credit in March 2013 which the university relies on for seasonal cash flow, and thin headroom under debt financial covenants.

WHAT COULD MAKE THE RATING GO UP

Unlikely given the negative outlook. Any upgrade would be driven by substantial growth in unrestricted liquidity and financial resources coupled with stable enrollment, a trend of net tuition growth, larger cushion under financial covenants and improved operating cash flow including better fundraising

WHAT COULD MAKE THE RATING GO DOWN

Violation of covenant requirements that could result in acceleration of all or a portion of debt; inability to refinance operating line; additional borrowing; erosion or encumbrance of unrestricted liquidity; 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.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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 rating action on the support provider and in relation to each particular 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.

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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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