UNIVERSITY PARK, Pa. -- Penn State has received a boost from Moody's Investors Service, going from a rating of Aa2 with a stable outlook to Aa2 with a positive outlook, citing the University's "rapid and effectively executed improvements to its governance, best practices and management over the past year."
The Aa2 rating with a positive outlook reflects a high-quality credit profile, as well as Penn State’s significant liquidity, limited financial leverage, and rapid response to challenges over the last year.
The rating agency's report also references the $59.7 million resolution of most of the settlement claims arising from the sexual abuse scandal related to former assistant coach Jerry Sandusky in its rationale for revising the outlook. Moody's predicts that Penn State will be able to resolve any remaining claims, while maintaining and improving its already solid credit fundamentals. Additional factors that contributed to the positive outlook issued by Moody's included the expectation that Penn State's performance and operating margin will continue to strengthen.
"Since Moody's previous report in October 2012, we have worked diligently to change our policies and our procedures to reflect best practices in many areas, including governance and safety," said Penn State President Rodney Erickson. "The expectation expressed by Moody's and reaffirmed every day at Penn State is that we will continue to evolve as a leader in governance and remain one of the best universities in the world."
The Moody's report also said that despite the rapid and broad changes made at the University, "it appears that Penn State's major constituencies have generally embraced them, with to date little to no negative impact or disruptions on the university, its board, operations and reputation."
The credit rating company also determined that Penn State kept on track with its high donor support, consistently strong operations, and solid faculty retention and recruitment. Moody's expects these trends to continue.
The Aa2 rating grades the institution as being high-quality and a very low credit risk for long-term investments.
In May 2013, Moody's provided a mid-year report that favorably acknowledged Penn State's rapid progress and reforms. It also noted that Penn State is one of the nation's largest public universities and "student demand has remained strong."