The second quarter of 2012 had the highest quarterly number of US public finance downgrades of the last 10 years as significant financial pressure was present across all public finance sectors, says Moody"s Investors Service in its quarterly report on rating activity, which also captured rating activity for the first half of the year.
"About half of the downgrades in the quarter affected the debt of cities and school districts with many of these in California and Michigan," said Moody"s AVP-Analyst Dan Steed, author of the report, "US Public Finance Rating Revisions for Q2 2012."
"Because the number of upgrades also increased, the 4.4 to 1 ratio of downgrades to upgrades was only slightly higher than the prior quarter," said Steed. On the basis of par amounts, downgrades exceeded upgrades by 7.2 times, down from 14.2 in the first quarter.
"Stressed budgets and weakening liquidity are the predominant factors driving down credit ratings among issuers," said Steed. Sectors covered in the report include state and state-related entities, local governments, not-for-profit hospitals, higher education and not-for-profit entities, infrastructure, and housing.
Notable public finance downgrades during the quarter included Temple University Health System; Triborough Bridge & Tunnel Authority; Clark County (NV) School District, Detroit"s general obligation bonds and water and sewer revenue bonds. Also, all 90 California redevelopment district authorities rated by Moody"s were downgraded below investment-grade due to repercussions from a state law eliminating the agencies.
"Our report outlines the trends in each public finance sector, discusses key rating factors, and highlights the most significant rating changes," said Steed.
It also captures Moody"s rating revisions for the first half of 2012, which saw the downgrades of 502 public finance issuers with total par value of $142.24 billion. In contrast, 117 issuers and $14.45 billion of par amount received upgrades during the first-half of the year.
