DALLAS — Moody’s Investors Service restored Texas Southern University’s credit to investment grade Tuesday as the historically black school continued its recovery from a financial scandal that threatened its accreditation with the Southern Association of Colleges and Schools.
Moody’s lifted to Baa3 from Ba1 the state university’s $90.6 million of fixed-rate revenue financing system bonds. Fitch Ratings rates TSU BB-plus with a negative outlook. TSU does not carry ratings from Standard & Poor's Corp.
The university lost its investment-grade rating on July 25, 2007, when Moody’s lowered it to Ba3 from Baa3.
At the time, an advisory committee appointed by Texas Gov. Rick Perry sought ways to save TSU after its president and chief financial officer faced criminal charges.
University president Priscilla Slade was fired in June 2006 over allegations of financial mismanagement. She and three other staff were indicted. Chief financial officer Quentin Wiggins was convicted and sentenced to 10 years in prison.
Slade’s first trial resulted in a hung jury. To avoid a retrial in 2008, she reached a plea bargain in which she received 10 years deferred adjudication.
To keep TSU operating, the governor’s committee recommended an emergency state appropriation and quarterly audits.
In March 2007, Integrity Parking Systems closed a bond-funded parking garage built and managed for the university because of an unpaid $1.7 million bill.
While a foundation was legally responsible for the debt, the financing was based on revenue from a fee the university never imposed. TSU assumed management of the parking garage last year.
Ultimately, the committee recommended that TSU remain independent and not be taken over by another university system or put under the control of a conservator.
On June 24, the Southern Association restored the Houston school’s full accreditation, 18 months after it was placed on probation.
The probation was lifted in June 2009 after an outside auditing firm completed its report on TSU’s finances but reinstated in December 2009 because records had not been received.
The accreditation is up for renewal in 2011, Moody’s noted.
“The rating outlook remains positive, reflecting the potential for continued credit improvement if TSU were to retain significant state support, successfully renew its 10-year accreditation in 2011, stabilize enrollment and associated revenue pledged to bondholders, and continue to produce audited financial statements in a timely fashion,” analysts wrote.
Moody’s also rates $27.9 million of state-backed TSU bonds Aa1.
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Corrected August 5, 2010 at 12:43PM: Correcting ratings to show Fitch rating.