Market Watch
November 11, 2011
http://www.marketwatch.com/story/penn-state-faces-moodys-rating-downgrade-2011-11-11
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| Former Penn State football coach Joe Paterno speaks to reporters earlier this week. |
NEW YORK (MarketWatch) — Moody’s Investor Services said Friday that it has placed the revenue bond rating for Penn State University on review for possible downgrade.
The university is reeling from a scandal involving alleged sexual abuse of several children by a former leader of the football coaching staff, Jerry Sandusky, who was indicted and arrested last weekend. School authorities also are said to have known about the abuses but apparently did not intervene.
The scandal already has claimed the jobs of Penn State President Graham Spanier and legendary head coach Joe Paterno. In addition, athletic director Tim Curley and a university senior vice president, Gary Schultz, are facing charges of perjury and of failing to report the abuse.
It’s likely that the fallout still has a long way to go, though, as prospective donors and students digest the full extent of the wrongdoings in State College, Pa.; the university also faces possible lawsuits from Sandusky’s alleged victims. Moody’s said Penn State has about $1 billion of rated debt.
“Over the next several months, Moody’s will evaluate the potential scope of reputational and financial risk arising from these events,” the ratings agency said in a statement. “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,” according to Moody’s
Also Friday, The Wall Street Journal reported on its online edition that “about a half-dozen” advertisers have pulled ads from ESPN DIS +0.95% broadcasts. The report cited an unnamed media buyer as saying clients were being advised to move away from those games. Read more about Penn State losing sponsors on WSJ.com.
Late Thursday, Cars.com withdrew its sponsorship of ESPN’s broadcast of this weekend’s game between Penn State and University of Nebraska because of the allegations regarding Penn State, the Journal said.
An ESPN spokeswoman told MarketWatch that the network does not comment on individual advertiser activity.
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