One day after Gov. Chris Christie appointed an emergency manager for Atlantic City, Moody's Investors Service said Friday it was downgrading the city's bond rating six notches.
The rating agency cited Christie’s decision and the city’s nearly $400 million in debt, which may be restructured by the bankruptcy specialists appointed by the state. That could “involve a loss to bondholders,” Moody’s said, and “the increased risk of default further arises from the city's looming $12.8 million note maturity” on Feb. 3.
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The service downgraded Atlantic City’s general obligation debt to Caa1 from Ba1. That rating “indicates a high risk of default over the next five years.” The rating could go up if the city repays “all debt obligations with expressed commitments to honor future obligations” and if legislation is adopted that “fully stabilizes or meaningfully augments city revenues.”
The city currently has $344 million of outstanding long-term general obligation debt and $397 million of total debt, Moody’s said in a news release.
The move comes a day after Christie, during his third scheduled summit on the future of the resort town, announced plans to implement an emergency management team for the city through an executive order. Kevin Lavin, a corporate finance attorney most recently with FTI Consulting, will take over as the city’s emergency manager and will be supported by Kevyn Orr, the former emergency manager for the city of Detroit, who will serve in an advisory role.
The city is reeling after the closure of four of its 12 casinos last year — the Atlantic Club, Showboat, Revel and Trump Plaza. A fifth, Trump Taj Mahal, has also been teetering in recent months in a once-dominant resort that has been battered by newer regional competition.