Y.U. Credit Rating Downgraded Amid $380M Abuse Lawsuit Fears
Yeshiva University’s credit rating has been downgraded by a major ratings agency amid large and growing deficits, a falling endowment and fears of costly litigation stemming from recent allegations of sexual abuse at its high school.
Moody’s downgraded Y.U.’s debt from A2 to Baa1, putting it below the median credit rating for similar institutions.
The agency says that the litigation prospects of the alleged sexual abuse victims will largely determine if the debt is downgraded further.
Since its peak in 2007 Y.U.’s endowment has cratered, falling 45%, doing handily worse than the stock market. Y.U.’s reliance on hedge funds, in particular, has been extremely damaging. It was also slammed by the financial crisis and damaged by its entanglement with Bernie Madoff’s Ponzi scam.
Meanwhile, the federal lawsuit filed last week by former students at Y.U.’s affiliated high school, alleging administrative negligence in response to abuse they suffered there, is demanding over $380 million in damages. According to Moody’s the attendant publicity may have large consequences for Yeshiva’s fundraising efforts.
Many universities nationwide are facing similar financial crises as expenses balloon and tuitions stagnate. In fact, in January Moody’s released a report suggesting that the entire industry was on a fiscally unsustainable path, and the news that federal interest rates on student loans are set to double only worsens these prospects.