Moody’s places Penn State on credit watch over Paterno scandal

The Moody’s credit rating agency said Friday that it is putting Penn State University under review for a possible credit downgrade over the child sex-abuse scandal that led to the firing of famed football coach Joe Paterno.

Moody’s will assess the damage to the university’s reputation and could lower its Aa1 rating.

“We will monitor possible emerging risks emanating from potential lawsuits/ settlements, weaker student demand, declines in philanthropic support, changes instate relationship and significant management or governance changes,” Moody’s said in a release.

A downgrade could make it more expensive for Penn State to borrow money. 

Penn State has been rocked by revelations of the alleged sexual abuse committed by former coach Jerry Sandusky, who is under arrest. Paterno was fired Thursday for allegedly failing to do enough to bring attention to allegations about Sandusky’s alleged crimes. The firing led to rioting by Penn State students.

According to Moody’s, Penn State has operating revenues of $4.6 billion and $3.9 billion in overall financial resources.

Moody’s is also keep a watchful eye on Congress this month. Failure by the deficit supercommittee could lead Moody’s to downgrade the AAA rating enjoyed by U.S. bonds.