Newark, N.J., Downgraded to Baa1 by Moody's

Moody's Investors Service said it has downgraded the city of Newark, N.J.'s general obligation rating to Baa1 from A3 on $574.5 million general obligation bonds outstanding.

The unlimited general obligation bonds outstanding are secured by the city's unlimited general obligation ad valorem property tax pledge.

Concurrently, Moody's has downgraded the underlying rating on $74.1 million of 2010A limited general obligation bonds to Baa2 from Baa1. The outlook remains negative.

The downgrade of the general obligation unlimited tax rating to Baa1 from A3 reflects the city's depleted reserves and liquidity with sizable and persistent budget gaps, the city's substantial and diverse $13.9 billion tax base anchored by a significant corporate, government and non-profit presence, and an above-average debt burden and pension liability.

The downgrade of the series 2010A bonds reflects the same credit factors, as well as the bond's limited obligation property tax pledge.

The negative outlook reflects the view that Newark's financial position will continue to be strained with late budget adoptions and a persistent structural imbalance due to growing recurring expenditures coupled with revenue-raising limitations. Future deterioration of the city's financial position could result in further rating pressure and/or an increased notching differential on the series 2010A limited tax general obligation bonds.

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