Standard & Poor's Ratings Services said it has revised its outlook to negative from stable and affirmed its AA long-term bond rating on Pennsylvania State University's series 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010 bond.
Standard & Poor's also affirmed its A-1-plus short-term rating on the university's series 2009B variable-rate demand bonds (VRDBs), currently supported by self-liquidity and AA/A-1 rating on the series 2002 VRDBs based on its joint criteria. The AA rating on the bonds reflects Standard & Poor's view of Penn State's general obligation pledge.
"We based the outlook revision on our assessment of the financial uncertainty associated with pending litigation and related expenses regarding the Sandusky scandal," said Standard & Poor's credit analyst Blake Cullimore. "While Penn State's current credit metrics remain consistent with the rating category, we believe that the uncertainty and potential magnitude of financial liability could lead to credit deterioration over the next two years," said Cullimore.