NEW YORK (S&P Global Ratings) April 10, 2020--S&P Global Ratings revised the outlook to negative from stable and affirmed its ratings on certain U.S. not-for-profit 501(c)3 organizations in the wake of the COVID-19 pandemic and the uncertainties surrounding the ultimate economic fallout (see list below). At the same time, S&P Global Ratings revised the outlook to stable from positive on ratings for 501 (c) 3 organizations that previously carried a positive outlook (also identified in the list below).

Our non-profit sector includes a broad range of credits ranging from cultural and research organizations to foundations, membership organizations, service organizations, and also includes several unique organizations which are classified as 501(c)3. Our ratings on these 501(c) 3 organizations range from 'AAA' to 'BB'. The outlook revision on the organizations identified in the list below reflects our belief that they are facing, or could face, challenging economic or fundamental business conditions that could result in lower ratings over the next one-two years. While most of our ratings have been relatively stable over the years, the negative outlook on these organizations reflects potential pressure on financial operations driven by current and forecasted economic conditions. For some organizations, lost revenues are a result of canceled performances and events, as well as closures of facilities, with uncertainty around timing of re-opening and how long it will take for admissions and events revenues to return to pre-COVID-19 levels. For others, there is a potential loss or delay in payments of various research grants. This situation is evolving, with uncertainty around the potential effects during this economic slowdown. Given this and the lack of clarity about the possible duration of the COVID-19 outbreak, in our opinion, operations could be weaker than expected. Most of these organizations depend on endowments and fundraising, and declining investment performance and endowment market values along with weaker fundraising results could also negatively affect ratings. We believe there will be greater pressure on those organizations with limited revenue and expense flexibility, lack of liquidity or balance sheet cushion, and weak fundraising capabilities.

We believe shelter-in-place and other directives to protect the health and safety of individuals from the community spread of COVID-19 present economic challenges. We view the uncertainty on the timing and duration of the spread of the coronavirus throughout the country as a health and safety social risk under our environmental, social, and governance (ESG) factors.

A negative outlook is not necessarily a precursor to a rating change. The negative outlook reflects our anticipation that there is at least a one-in-three chance that economic conditions worsen to a degree that affects the organization's ability to maintain credit characteristics in-line with the current rating level. If economic activity resumes, however, and credit metrics are upheld, we could revise the outlook to stable. We will review all ratings individually with respect to an organization's liquidity and debt structure in addition to the ability to mitigate revenue loss over time with incremental rating actions possible. We could revise the negative outlook on specific ratings to stable on a case-by-case basis during the outlook period as we assess risk mitigation. At the same time, we could also lower the ratings during the outlook period.

While we expect to know more in the next few months about fiscal 2020 operations, there is still uncertainty around the longevity of the pandemic and its long-term financial impact. While some of these organizations have applied for a Small Business Administration loan under the Paycheck Protection Program, timing of disbursement and amounts will vary. Some ratings will be more susceptible to near-term operating pressure associated with decreased revenues. Significant revenue losses could affect even organizations that have experienced strong operations historically and received demonstrated financial support from fundraising and endowment spend. For all credits, an extended COVID-19 duration, and correspondingly more severe economic fallout, has the potential to result in diminished revenues and fundraising in the long term, which could be inconsistent with current rating levels, in our opinion. It is clear that the current situation is fluid and that the longer-term implications of COVID-19 might not be manifest in the short term.

The outlook period is two years for investment-grade ratings and one year for non-investment grade ratings. The negative outlook for individual organizations will be resolved over time, as we complete individual reviews and the financial and operating impact from COVID-19 can be better estimated. In particular, S&P Global Ratings will be evaluating, among other things, the impact of lost rental revenue on fiscal 2020 and fiscal 2021 financial results, if applicable; fiscal 2021 financial projections; management teams' strategies for addressing potential revenue declines; and overall liquidity and financial flexibility. Although we understand COVID-19 to be a global risk, we could consider incremental negative rating actions during the outlook period should unforeseen pressures related to the pandemic materially affect the finances, balance sheet, or liquidity of the organization. We could revise the outlook to stable for organizations that are able to demonstrate their ability to offset or mitigate pressures to operating incomes during the outlook period. We will also consider the strength of the organization's liquidity and reserves and assess their ability to maintain them.

CERTAIN 501(c)3 ORGANIZATIONS HAVE BEEN EXCLUDED FROM THIS OUTLOOK ACTION

Please note that, after careful review, we have excluded certain 501 (c) 3 organizations from this negative outlook action and maintained stable outlooks for those organizations at this time. Some of the reasons we might have decided to exclude an organization from this action include, in some combination:

• Very little debt, or debt that matures in the near term;
• Overwhelming resources relative to debt, and for the rating;
• Significant liquidity for the rating;
• In rare cases, operating revenues that are insulated from, or thriving under, current economic conditions

Should unexpected pressures related to the pandemic materially affect finances, balance sheet, or liquidity over time, we could also consider a negative rating action on these organizations during the outlook period.

We also excluded university foundations (also 501 (c) 3 organizations) from this rating action. We consider university foundation ratings as closely connected to our ratings on colleges and universities (which are not part of this not-for-profit 501 (c) 3 sector).