PHILADELPHIA -- Moody's Investor Services has upgraded the University of Pennsylvania's long-term debt rating to Aa2, from Aa3.  Moody's removed Penn's rating from a watchlist for potential upgrades and said the rating outlook is stable.

This rating upgrade to Aa2 restores the University to its highest rating level, last achieved in 1998.

"We're very pleased," Scott R. Douglass, Penn's vice president for finance and treasurer, said.   "In making this upgrade, Moody's cited our continued growth in financial reserves -- with a resulting financial flexibility,  our enhanced fund-raising and our sustained strengthening in operating performance, driven in part by improvements at our Health System."

Moody's also looked at Penn's competitve ranking among the nation's premier universities, its size, its prestigious graduate and professional programs and the magnitude of its research enterprises.  A November 2006 upgrade in the University's Health System debt rating to A1, from A2, also contributed to Penn's overall financial strength.

The Health System's clinical reputation helped to contribute to an increase in patient volume and market share, particularly in acuity and more profitable services, according to the Moody's evaluation.

The rating agency also noted that Penn has invested significantly in improving the attractiveness of the campus facilities without a lot of debt and said the stable outlook reflects an expectation that the University will use debt prudently as it continues to move forward.