Basketball scandal could affect credit ratings of University of - WDRB 41 Louisville News

Basketball scandal could affect credit ratings of University of Louisville, foundation

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Greg Postel, interim president of the University of Louisville Greg Postel, interim president of the University of Louisville

LOUISVILLE, Ky. (WDRB) --  The University of Louisville and its nonprofit foundation could see their credit ratings take a hit as a result of the latest scandal in the men’s basketball program.

Bond rating agency Moody’s Investor Service is reopening a recent review of the two agencies’ ratings due to “developing credit issues,” according to a press release dated Tuesday.

There is no immediate change to the investment-grade ratings of the university (A1) and the foundation (A3).

But the university has only about $80 million in “liquidity” – or available cash – and the recent criminal allegations involving the basketball program create “potential for increased financial burden” on U of L, according to Moody’s.

No one from U of L has been charged in the case, which centers on alleged payments to recruits by apparel sponsor Adidas with coaches’ knowledge.

Moody’s also said it has questions about the July 1 transition of University Hospital from KentuckyOne Health back to university management.

Interim U of L President Greg Postel, a medical doctor who is also the university’s interim vice president for health affairs, has said the transition went smoothly and that the hospital’s finances are strong.

“The university looks forward to meeting with representatives from Moody’s to review the positive steps we’re taking to improve our financial position, as well as to showcase our campus and related activities,” U of L spokesman John Karman said in an emailed statement.

The credit review should take about three months.

Moody’s already downgraded both the university and foundation in November 2016, citing the university’s weakening liquidity.

Moody’s said its current review will focus on U of L’s “ability to maintain stakeholder confidence.”

“Timing and intention for installing permanent leadership, along with an assessment of sustainable remediation of ongoing governance concerns, will also be incorporated into the review,” Moody’s said. “Moreover, legal considerations and challenges related to the integration of the new hospital relationship, incremental to other competing operating priorities - such as immediate and longer term trends effects on enrollment, net tuition revenue growth and donor support - will also be central to the analysis.”

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