A state rescue plan fails to address Atlantic City's long-term fiscal challenges, S&P Global Ratings said Tuesday in affirming its deep junk-level CC rating of the New Jersey gambling resort, and maintaining a negative outlook.
The legislation allows Atlantic City to meet near-term bonded debt obligations, but is not a long-term solution, S&P analyst Timothy Little wrote.
The rescue package provides Atlantic City a $60 million bridge loan and sets up fixed payments-in-lieu of taxes from casinos, instead of variable property taxes.
The city has five months under the legislation to plug its more than $80 million budget deficit and form a sustainable five-year financial plan, or it face state intervention that empowers New Jersey's Local Finance Board to alter outstanding debt and municipal contracts.
"In our opinion, the long-term prospects of a full and complete recovery of the city remain elusive absent a credible plan to restore fiscal solvency," said Little. "Despite aid received by the city, it is our opinion that some form of debt restructuring or debt impairment is highly likely unless a credible recovery plan that protects the city's promise to bondholders is produced."
S&P lowered Atlantic City general obligation bonds one notch to CC from CCC-minus in early May citing an option that a default or debt restructuring was "a virtual certainty" even under the most optimistic conditions. Moody's cut Atlantic City two notches to Caa3 in April and estimates it has more than $400 million in debt outstanding.