Michigan State University will increase debt load to fund abuse settlement

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Michigan State University’s outstanding bond debt would increase 50% if it issues securities to pay for a $500 million settlement with 330 women and girls who were victims of serial sex abuser Larry Nasser.

Such a sale would push Michigan State’s outstanding general-revenue debt to $1.5 billion from $1 billion, according to the university’s most recent financial statement. The school’s trustees approved the $500 million settlement and related bond sale Friday, but the agreement still has to be finalized and approved by a judge, the Detroit News reported.

The bonds will be issued within 30 days after the settlement agreement is finalized, Mark Haas, the university’s vice president for finance and treasurer, said in an email. However, the university expects insurers to help cover the claims, offsetting the increase in debt, Haas wrote. The university is still in discussions with insurers, he said.

“We are working hard with the plaintiffs to finalize as soon as practical," he wrote.

Michigan State’s debt is rated AA-plus by S&P Global Ratings and Aa2 by Moody’s Investors Service. Moody’s downgraded the school last month in anticipation of the settlement.

Michigan State, which had an operating loss of $503 million last year, also has a $1.1 billion unfunded liability for retiree healthcare benefits, according to its financial statement. The university closed its operating deficit with state aid and investment gains from the endowment.

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