CHICAGO, May 3 (Reuters) - Michigan State University’s heightened financial risk in the wake of a sex abuse scandal involving former USA Gymnastics doctor Larry Nassar led Moody’s Investors Service to cut the school’s credit rating to Aa2 from Aa1 on Thursday. The credit rating agency said the downgrade, which affects about $975 million of debt, was prompted by a growing number of lawsuits, federal and state probes, and Michigan legislation that could all hurt the university’s finances.
Plaintiffs and investigators question why the U.S. Olympic Committee, USA Gymnastics and Michigan State University, where Nassar also worked, failed to probe complaints about him going back years.
“We expect operating performance to thin over the short-term, with ongoing legal costs and university investment into enhanced risk management and governance issues increasing costs,” Moody’s said in a statement.
A negative outlook reflects “uncertainty around timing of resolution of litigation and the magnitude of the financial and reputational ramifications to the university,” it added.
The university did not immediately respond to a request for comment.
Nassar, a former faculty member and physician at an on-campus clinic at Michigan State University was sentenced in February to up to 125 years in prison after some 200 young women testified about decades of abuse at his hands. He had already received a sentence of up to 175 years in a different jurisdiction, and was sentenced to a 60-year federal term for child pornography convictions. In March, S&P Global Ratings revised the outlook on the university’s AA-plus rating to negative from stable due to the fallout from the scandal.
Reporting by Karen Pierog; Editing by Richard Chang