Planned general obligation taxable refunding bonds slated to be issued by Atlantic City under New Jersey's Municipal Qualified Bond Act have been assigned an A-minus rating and stable outlook by Standard & Poor's.
S&P analyst Lindsay Wilhelm said in a report issued May 1 that the Garden State's enhancement program under the MQBA that Atlantic City is participating in is intended to facilitate distressed municipal issuers' access to the capital markets. The program instructs the state treasurer's office to withhold qualifying state aid from Atlantic City and instead directs the funding to be paid to bondholders. Atlantic City, which is rated junk-level BB by S&P, received necessary state approval to issue these bonds, according to Wilhem.
"This rating reflects the strength of the state enhancement program established by the New Jersey Municipal Qualified Bond Act," said Wilhelm.
Atlantic City revenue director Michael Stinson said the city is planning to issue taxable bonds not to exceed $43 million sometime in May that would be used to pay off a $40 million state loan it received a 60-day extension on in late March. Stinson said the city will also go to market with a separate transaction not to exceed $12 million in tax-exempt bonds that would pay off $12 million of maturing bond-anticipation notes.
Stinson said this will be the first time Atlantic City is taking part in the New Jersey's MQBA program and that it will be a very positive development for the city.
"This has been a good partnership with the state," said Stinson. "This will help us a lot."
S&P noted that it rates bonds issued under the MQBA one notch below New Jersey's GO bond rating since the withheld state aid that supports debt service under the program "is subject to appropriation by the state." The bonds, which are "secured by Atlantic City's full faith and credit GO pledge", were given stable outlook by S&P to reflect the state's credit status.
Atlantic City, which is facing a $101 million budget gap, was kept on credit-watch negative by S&P on April 30 since some of the short-term options the city's emergency manager Kevin Lavin is exploring to avoid a long-term bankruptcy include debt payment deferrals. The city's GO debt is rated Caa1 by Moody's Investors Service, which is four notches below S&P's rating.
