Standard & Poor’s Ratings Service has revised Penn State’s financial outlook from stable to poor in light of costs related to the Jerry Sandusky child sex abuse case, according to a press release.
“We based the outlook revision on our assessment of the financial uncertainty associated with pending litigation and related expenses regarding the Sandusky scandal,” Blake Cullimore, Standard & Poor’s credit analyst said according to the release.
Director of Communications for S&P Ratings Services Edward Sweeney said Penn State is currently rated AA — the third highest possible rating. He said that an “outlook is a directional indicator of a potential rating change.”
Sweeney said there is a one-in-three chance that the university’s rating will change. Therefore, the rating has not yet changed, but the revision done by S&P shows that if the rating were to change, it would be a negative change.
S&P sees the following as some of the credit challenges Penn State faces; revenue and expense uncertainty, declining enrollment at some commonwealth campuses and limited flexibility with regard to tuition.
Cullimore said in the release that the university’s credit has the potential to decline.
“While Penn State’s current credit metrics remain consistent with the rating category, we believe that the uncertainty and potential magnitude of financial liability could lead to credit deterioration over the next two years,” he said.
The university’s credit rating through S&P is still AA, university spokesman David LaTorre wrote in an email.
“As such, the University remains among the top 40 public rated institutions in the country and maintains the same rating as the Commonwealth of Pennsylvania,” LaTorre wrote.
S&P’s assessment of the university reflects the role of Penn State as Pennsylvania’s largest university, an increase in enrollment at the University Park campus and consistent fundraising and support from alumni and donors.
LaTorre said the university’s rating will be reevaluated again within the next two years.
Penn State’s credit could return to a “stable outlook” over the next two years, if the university were to achieve a resolution to the issues mentioned by S&P.
“A positive rating action during the two-year outlook period is unlikely to the range of challenges facing the university,” S&P wrote in the release.
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