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Penn State Scandal: Moody's Warns Of Possible Credit Downgrade For Troubled School

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BOSTON - The child sex abuse scandal at Penn State University reached Wall Street Friday when the ratings agency Moody's warned of a possible credit downgrade for the prestigious university.

``Over the next several months, Moody's will evaluate the potential scope of reputational and financial risk arising from these events,'' Dennis Gephart, a senior analyst at Moody's, said in a release.

Penn State's debt is currently rated Aa1, reflecting very strong student demand and other credit strengths at Pennsylvania's flagship university.

Penn State has ``approximately $1 billion of rated debt,'' Moody's said.

Moody's cited the school's strong academic brand, which it said has ``improved substantially'' over the past few decades, and its ability to draw out-of-state students who pay higher tuition rates.

Graham Spanier, who was asked to step down as president, is recognized for having lifted the university's academic reputation during his 16 years as its head.

Moody's said it is watching a number of factors that could come out of the scandal centered on Jerry Sandusky, the former assistant football coach who has been charged as a serial pedophile.

These include potential lawsuits and settlements, weaker student demand, declines in philanthropic giving, and significant management or governance changes. (Reporting by Ros Krasny; editing by Philip Barbara)

Copyright 2011 Thomson Reuters. Click for Restrictions.

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