S&P: Pennsylvania State University 2018 Tax-Exempt Bonds Rated 'AA'

S&P Global Ratings assigned its 'AA' long-term rating to The Pennsylvania State University's (Penn State) $65.26 million series 2018 tax-exempt bonds. At the same time, we affirmed our 'AA' long-term ratings on various series of existing bonds also issued by Penn State. In addition, we affirmed our 'A-1+' short-term rating on the university's series 2009B variable-rate demand bonds (VRDBs), currently supported by self-liquidity. The outlook on all applicable ratings is stable.

"The long-term rating reflects our view that Penn State's enterprise profile is very strong while its financial profile is extremely strong," said S&P Global Ratings credit analyst Ken Rodgers. "However, in accordance with our criteria, we applied an override for business disruption/event risk."

The business disruption/event risk factored into the rating relates to prior events associated with the university that may have legal, regulatory, or insurance ramifications that may be difficult to quantify due to a long period for ultimate resolution. These events include the litigation following the fall 2011 child sexual abuse revelations pertaining to Gerald A. Sandusky, a former athletic department official and a more recent tragic accident involving a student at a fraternity-the latter incident does not involve the university directly. We recognize that the university has made considerable progress in rectifying operational policies and procedures regarding the Sandusky revelations and mitigating associated financial risk.

The stable outlook reflects our view of Penn State's generally favorable enrollment trend, anticipated continued solid financial operating performance, and successful fundraising efforts and low debt burden, all of which suggest to us the university should be able to maintain its rating at the current level for the two-year outlook period.
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