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Credit risk to Penn State from athletics scandal

11/14/2011: Moody’s reports that Penn State bonds will be reviewed for non-repayment risk, because of the Coach Sandusky child rape scandal:

New York, November 11, 2011 — 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 university board has also dismissed Penn State’s president and head football coach.

Over the next several months, Moody’s will evaluate the potential scope of reputational and financial risk arising from these events. While the full impact of these increased risks will only unfold over a period of years, we will also assess the degree of near and medium term risks to determine whether to downgrade the current Aa1 rating. We will monitor possible emerging risks emanating from potential lawsuits/settlements, weaker student demand, declines in philanthropic support, changes in state relationship and significant management or governance changes….

This will increase the borrowing costs of other universities with big-time athletic programs looking to sell bonds – like UO.

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