UPDATE 1-Sex abuse lawsuits lead Moody's to cut Penn State rtg

Fri Oct 26, 2012 11:43am EDT

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Oct 26 (Reuters) - Moody's Investors Service downgraded
Pennsylvania State University's credit rating to Aa2 from Aa1 on
Friday because of a likely blow to the school's finances from
lawsuits related to the Jerry Sandusky sex abuse scandal.
    The action affects about $893 million of Penn State's
outstanding debt.
    Sandusky, Penn State's former assistant football coach, was
sentenced on Oct. 9 to 30 to 60 years in prison for 45 counts of
child sex abuse. He is appealing the convictions.
    The molestation scandal has already prompted several
lawsuits against the school by victims and at least one
whistleblower seeking $8 million in damages.
    Penn State's board implemented measures to speed up legal
settlements, but the full cost of settlements and potential
judgments is still unknown and "could be significant," Moody's
said in a statement.
    Probes by state and federal prosecutors are also still
ongoing.    
    Moody's outlook on Penn State is now stable with the lowered
credit rating. It expects Penn State to "remain a leading U.S.
public university with favorable student demand, positive
operating performance, high donor support and a strong research
position."
    On Oct. 15, Standard & Poor's Ratings Services revised the
outlook on Penn State's AA rating to negative from stable,
citing potential financial fallout from the Sandusky case.
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