Temple U. Responds to Moody's Downgrade Review

Temple University is guarding its own credit rating after its affiliated hospital system was dropped to speculative grade.

Moody's Investors Service put Temple University's Aa3 rating on review for a downgrade last week.

"Temple University's position in the marketplace is strong," assistant vice president for communications Ray Betzner said. "This fall's entering class is larger and more academically prepared than any in our past. We've completed our best fundraising year ever, and we have maintained stable support from the Commonwealth [of Pennsylvania]. Over the next 90 days, we will work closely with Moody's to address their concerns and demonstrate our continued financial vitality, and that the university remains focused on providing outstanding health care education, as part of its overall educational mission."

Temple University Health System has $525 million in debt outstanding and is rated Ba2 by Moody's Investors Service and BB-plus by Fitch Ratings and Standard & Poor's after they downgraded it to junk territory in the last two months.

On July 24 Moody's put the university proper on review for a downgrade from Aa3. The university has $694 million in debt outstanding independent of the health system's debt.

"A downgrade is likely [to the university] if Moody's determines that Temple University will be negatively impacted from pressures of Temple University Health System from a reputational, operations, liquidity, strategic or management focus perspective," wrote Diane Viacava, a Moody's vice president.

The health system is a subsidiary of the university but the university has no legal liability for the system's debt, according to Moody's.

"Temple University has provided no financial support to TUHS but has previously exercised its governance privileges through building the new management team and more active oversight and strategic support," Viacava wrote.

"The university exercises control over [the health system's] strategic direction and planning," Moody's spokesman David Jacobson wrote. "While not legally obligated to repay the debt, the university is the parent, and the dean of the medical school is also the CEO of the health system, bringing the health enterprise under the university umbrella from an operations perspective."

Moody's supplied the most recent downgrade of Temple University Health System, downgrading the system to Ba2 from and already speculative-grade Ba1 on July 16.

"While TUHS is disappointed in and does not agree with the Moody's report, we remain optimistic that the steps we have undertaken are likely to result in improvements in financial performance," TUHS manager of media relations Jeremy Walter said.

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