Moody’s Considers Downgrading Penn State

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Moody’s credit rating agency is considering downgrading Penn State University because of the allegations of sexual abuse by former defensive coordinator Jerry Sandusky, related charges against two university officials and the firing of football head coach Joe Paterno, an icon at the school.

Penn State has approximately $1 billion worth of rated debt, according to Moody’s.

“Moody’s Investors Service has placed the Aa1 revenue bond rating of Pennsylvania State University (Penn State) on review for possible downgrade to assess credit risks emanating from the announcement this week by the Pennsylvania Attorney General of the filing of criminal charges involving child sexual abuse against a former assistant football coach, as well as perjury and failure to report charges against two senior university officials, including the CFO of the university,” the agency said in a statement released Friday.

The school reportedly pulled in $4.6 billion in revenue in 2011 and enrolls more than 80,000 students. Universities like Penn State typically incur debt to fund new construction and other capital improvement projects.

The university, like other state institutions, received $333.9 million from the Commonwealth of Pennsylvania in 2011 and faces a potential budget cut of $182 million in a proposal laid out by Pennsylvania’s Republican Gov. Tom Corbett.

Like most states across the country, Pennsylvania is undergoing economic hardship. Approximately 90 miles away from Penn State, the city of Harrisburg recently filed for bankruptcy, making it the sixth U.S. city to do so this year.

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