Moody’s upgrades Penn State rating, citing stable outlook

UNIVERSITY PARK, Pa. – Penn State has received a strong report from Moody’s Investor Services, which upgraded the University’s rating to Aa1 with a stable outlook on Feb. 26.

The credit rating firm’s rating assignment “recognizes Penn State’s exceptional liquidity enabling it to ably bridge the lack of Commonwealth of Pennsylvania appropriations due to the failure to enact its FY 2016 budget and strong operations from diverse and healthy revenue sources.”

David Gray, Penn State’s senior vice president for Finance and Business, said, “In spite of numerous challenges and a turbulent environment, Moody’s action to upgrade the University’s credit rating recognizes Penn State’s considerable strength in student demand, philanthropy, research activity and financial management.”

According to Moody’s, “the rating favorably incorporates university’s excellent strategic position as one of the nation’s largest and leading public universities, sustained philanthropic support, modest financial leverage and strong governance and management practices.”

The report also mentioned the planned expansion of Penn State’s health care operations, including the potential integration of the Pinnacle Health System.

In issuing its stable outlook for the University, Moody’s stated, “Penn State’s stable outlook reflects expectations of growth in balance sheet reserves driven by strong operations and good fundraising, ongoing research success, strong student demand with stabilized matriculation and manageable debt plans.”

Challenges cited by Moody’s include the current budget impasse in Pennsylvania, a significant increase in exposure to the health care sector, integration risk with the planned merger between Penn State Health and Pinnacle Health Systems, competition for students, tuition pricing and rising pension costs.

Ultimately, the report said, “Penn State will continue to enjoy a strong market position with good national student demand as a leading national research university.”

The report builds on last year’s strong report from Moody’s when the company gave the University a rating of Aa2 with a positive outlook in April 2015.

Last Updated February 29, 2016