Moody's Investors Service said today it has removed Penn State University from its "Watchlist for Possible Downgrade" and is confirming the university's Aa1 long-term rating.
Moody's is, however, assigning a "negative outlook" to Penn State within that rating class because of "ongoing uncertainty" regarding risks related to the child sex abuse scandal involving retired assistant football coach Jerry Sandusky.
The agency said risks include litigation costs and other indirect impacts on student recruiting and giving to the university.
"We expect that the most likely outcome will be that the University will settle a manageable number of claims by victims, with no substantial financial weakening, while also maintaining high levels of donor support and student demand," Moody's said in a statement. "We also consider risks of loss of research funding competitiveness to be minimal."
But because it will take longer than the current assessment period to know the performance of those indicators, Moody's said it will reassess Penn State's standing in the next 12 months.
Moody's bond credit rating business offers data on an organization's general creditworthiness. The highest designation is triple A (Aaa).
Penn State landed on the watch list six days after the arrest of Mr. Sandusky, charged with sexually assaulting 10 boys over 15 years.
The arrest sparked a storm of criticism and led to a shakeup of leadership within the football program as well as the university administration.
"Penn State's Aa1 rating is the second-highest category of Moody's 21 possible ratings and reflects the University's top financial position in U.S. public higher education," according to a written statement from Joseph Doncsecz, Penn State's associate vice president for finance and corporate controller. "This rating is on par with peer research universities and reflects our position as a leading public university with many fundamental strengths."
Bill Schackner: email@example.com or 412-263-1977.