Moody's Investors Service revised its outlook on Pennsylvania State University to positive from stable, citing the school's $59.7 million settlement with 26 sexual-abuse victims of former assistant football coach Gerry Sandusky.
Moody's also affirmed its Aa2 long-term rating for the school, which has $724.4 million of rated debt. Moody's had lowered the rating from Aa1 in October 2012.
The revision, Moody's said Wednesday night, reflects last week's settlement with most victims "combined with the university's continued strengthening of liquidity and strong operating performance."
The rating company cited Penn State's $4.4 billion of unrestricted monthly liquidity in fiscal 2013 as a credit strength. It also mentioned the school's 17.8% operating cash-flow margin for that year and $173 million of three-year average gift revenues for fiscal 2011 to 2013.
Credit challenges, said Moody's, include some uncertainty about six claims still outstanding, and the possible emergence of other charges and costs from state and federal investigations.
Standard & Poor's rates Penn State AA with a negative outlook.
Penn State said in a statement that its audited statements for the year ended June 30 will reflect the settlement.
Six claims are still outstanding. The university expects insurance to cover much of the cost and that it would not use tuition, donations or taxpayer money for the payouts.
Sandusky, 69, is serving 30 to 60 years in prison after his conviction last year of 45 counts of child sexual abuse. He is appealing the conviction.
Former university president Graham Spanier, former vice president Gary Schultz and former athletic director Tim Curley face trials on charges that they covered up complaints about Sandusky.
The family of 45-year head coach Joe Paterno, whom the school fired in 2011 when the scandal broke, is suing the National Collegiate Athletic Association over penalties that included a $60 million fine and elimination of 112 victories, which stripped Paterno's status as college football's winningest coach.