07-25-2012 Moody’s has Put Penn State on notice of a credit downgrade showing a faltering confidence in the university’s ability to survive the Sandusky child abuse scandal. Currently positioned at Aa1, the highest rating possible, suggesting little to no risk of default. However, the implications of a cumulative $60 million dollar fine are starting to worry creditors. It’s not that the school can’t make the payments over the next 5 years. They can, and then some. Except, the where the fine money comes from is being regulated, and it all comes down to their football program. No other sport programs funding or enrollment can be cut during these payoffs. Funding from the state cannot help out either. In short, it’s got to be the football program that eats this bill. The question is, will they survive it? For the next five years Penn State won’t be seeing new facilities, training regiments, scholarships, or really any additional funding. And 5 years is a long time-long enough to put them off their competitive edge for the next 10 years. Sponsors like StateFarm are already pulling their sponsorships. Student enrollment is down. And while the school may choose to make substantial cutbacks, none of their savings may go towards paying off the penalty. Moody’s says that Penn State has about $1 billion worth of debt, and a downgrade would make it that much harder for the school to borrow.For more news and updates, keep watching the financial news network. Find all our videos and stories on FNNO.com and follow us on Twitter @fnnonline.
