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St. Mary’s College of Maryland is facing a potential downgrade to its bond rating after an investor service placed the institution under review.

Moody’s investor service said in a letter that it will examine the college’s A1 long-term rating because of challenges including a shortfall in the number of freshmen enrolled next academic year. Early last month the college announced it was short by about 150 freshman students out of a projected 470; stepped-up recruitment since then has lowered the shortfall to about 100 students.

The letter also cites as factors for the review recent changes in senior leadership, including the abrupt departure of President Joseph Urgo, who last week asked that the college’s board of trustees not renew his contract after three years because of “personal and professional reasons.”

The downgrade, if approved, would impact $36 million in rated debt that is outstanding from past borrowing at St. Mary’s College.

The ratings agency said it plans to study the college’s plan to deal with the $3.5 million shortfall caused by next year’s small freshman class, as well as get more clarity on plans for new presidential leadership.

The letter cites St. Mary’s College’s “relatively high dependence on student charges with tuition and auxiliaries comprising 66.5 percent of the college’s operating revenue.”

Moody’s also says the cost to students is very high, and the limited economies of scale at the small public college make it difficult to cut expenses when needed.

The letter does cite several strengths at the college, including strong support from the state of Maryland, the ability of the college administration to adjust expenses to make up for the $3.5 million shortfall and its niche status as a residential public liberal arts college.

The review is expected to be finished within 90 days.

Jesse Yeatman