Moody's
slashes Atlantic City rating on bankruptcy potential
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[January 24, 2015]
By Hilary Russ
(Reuters) - Moody's Investors Service
slashed Atlantic City's credit rating six notches deeper into junk
territory on Friday, a day after New Jersey Governor Chris Christie
appointed an emergency manager with a mandate to consider a debt
restructuring.
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Atlantic City has about $344 million of long-term debt
outstanding. Moody's dropped the city's general obligation rating to
Caa1, down from Ba1, indicating that the credit rating agency thinks
there is a substantial risk of default over the next five years.
The appointment could spell trouble for bondholders, as the
emergency management team has ties to Detroit's historic bankruptcy.
The order from Christie to consider a restructuring also marks a
"rapid, dramatic" change from the usually strong oversight New
Jersey provides its local governments, including the requirement
that they pay their bond debts, Moody's said.
"That's why you see such a steep downgrade here," said Moody's
analyst Josellyn Yousef.
"This action, this executive order, really pivots that thinking,"
she said. "It indicates to us that perhaps in this situation (New
Jersey) may not be as willing to provide the local support they have
in the past."
![](http://archives.lincolndailynews.com/2015/Jan/24/images/ads/current/charrons_bch041713.png) Moody's spokesman David Jacobson said they could not talk about
whether the rating agency had discussed the likelihood of bankruptcy
with the state or new management team because any such conversations
are confidential.
"I've only been in office a short time. I continue to do what is
necessary to make Atlantic City economically vibrant, and that goal
hasn't changed," Mayor Don Guardian said in an email from his chief
of staff Chris Filiciello. "Our better days are still to come."
Moody's did not discuss the emergency management team with the city
before today's downgrade, Filiciello said.
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Moody's also gave Atlantic City's GO debt a negative outlook, citing
the possibility of a material impairment to bondholders from a debt
restructuring.
Christie's office did not immediately reply to a request for
comment.
Moody's also cut the water revenue debt of Atlantic City's Municipal
Utilities Authority four notches to B2 on Friday, affecting about
$18.4 million of debt. The downgrade reflects the authority's
rapidly declining customer base as the casino industry contracts,
with four of the city's 12 casinos closed in 2014.
(Reporting by Abinaya Vijayaraghavan in Bengaluru and Hilary Russ in
New York; Editing by Joyjeet Das, Alan Crosby and Meredith Mazzilli)
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