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Moody's places Penn State on rating review for possible downgrade


NEW YORK—Moody’s Investors Service Inc. on Tuesday placed Pennsylvania State University on a rating review for possible downgrade in anticipation of fallout from an independent report and athletic sanctions affecting Penn State’s future credit rating.

The Aa1 bond revenue rating review comes in the wake of an independent report released by former federal judge and former director of the FBI Louis Freeh that concluded that top officials at Penn State did nothing to investigate child sexual abuse allegations against former assistant football coach Gerald A. Sandusky, New York-based Moody’s said in a statement.

The review also takes into account the unprecedented $73 million in fines and penalties imposed by the NCAA and the Big Ten Council of Presidents and Chancellors for Penn State’s failure in handling the child sex abuse allegations.

“Our review will focus heavily on Penn State's governance and management, including the implementation of the recommendations of the Freeh Report, as well as other changes in board and management structure and process,” Moody’s said in the statement. “The uncertainty about future risks emanating from several other investigations at the state and federal level have also contributed to the decision to initiate a review of the rating.”

The rating action affects approximately $1 billion of debt and the review will assess the potential credit implications of the investigations impact on Penn State’s student demand and fundraising, Moody’s said.

The rating agency confirmed Penn State’s long-term credit rating of Aa1 with a negative rating outlook in February after the university was placed on review for possible downgrade in November as Moody’s weighed potential reputational damage days after allegations of child sex abuse against Mr. Sandusky surfaced.

Moody’s said the review likely would be concluded within 90 days.

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