S&P: Michigan State University Debt Outlook Revised To Negative On Title IX-Related Risk Management Issues

S&P Global Ratings revised its outlook to negative from stable and affirmed its 'AA+' long-term rating and underlying rating (SPUR) on Michigan State University (MSU) Board of Trustees' outstanding general revenue bonds. In addition, we affirmed our 'A-1+' short-term rating on MSU's tax-exempt and taxable commercial paper (CP) notes, issued on behalf of MSU. We also affirmed our 'AA+/A-1+' and 'AA+/A-1' ratings on the university's existing general revenue variable-rate demand bonds (VRDBs). The outlook, where applicable, is negative.

"The negative outlook reflects our view of risk management issues stemming from recent state and national inquiries related to historical Title IX concerns on campus, which have resulted in numerable changes to senior leadership," said S&P Global Ratings credit analyst Ashley Ramchandani. While management reports the hiring of additional staff and implementation of amended polices to address sexual assault prevention, patient care, and campus safety, in our opinion, current campus community tension may stall prompt and equitable resolution of stakeholders' concerns. We believe that there may be material effects on the overall enrollment and demand profile of MSU during the upcoming enrollment cycle, the degree to which currently remains indeterminate.

"The negative outlook further reflects our view of the potential effects of undefined financial obligations due to ongoing litigation," added Ms. Ramchandani. Moreover, additional litigation could occur based on current considerations of the extension of the statute of limitations and applicability of governmental immunity for MSU in the Michigan state legislature.

We believe the 'AA+' long term rating, at this time, remains appropriate given the university's historically strong market position, supporting its healthy demand profile and relatively stable enrollment. In addition, we believe the 'AA+' long-term rating reflects the school's consistently positive financial operating performance and abundant financial resource metrics. We will continue to monitor the effects of current risk management and senior leadership transitions on these factors during the outlook period.
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