The Atlantic City rescue package New Jersey Gov. Chris Christie signed before the Memorial Day weekend is a credit positive for the cash-strapped gambling hub, according to Moody's Investors Service.
Moody's analyst Douglas Goldmacher said in a statement late Friday that the legislation, which includes a $60 million bridge loan, provides short-term relief while also avoiding the immediate threat of a default or bankruptcy filing.
The bills stabilize Atlantic City's cash flow by having casinos make payments in lieu of taxes, as opposed to highly variable property taxes, for a 10-year period starting in 2017.
The package gives Atlantic City officials five months to balance a more than $80 million budget deficit and prepare a five-year financial plan or face a state takeover that would involve altering outstanding municipal debt and contracts.
"Moody's will continue monitoring how Atlantic City develops and implements its financial plan within the 150-day window, including the possibility of debt restructuring," said Goldmacher. "The latter would be considered a default if it includes any bondholder loss or impairment. We will also analyze how the city plans to return to long-term fiscal stability as the casino industry continues to consolidate."
Moody's slashed Atlantic City two notches to Caa3 in April. Standard & Poor's rates Atlantic City debt at CC.
Christie said after signing the legislation that the commissioner of the state's Department of Community Affairs will have the ultimate say on whether state intervention is necessary.
The Republican governor said the recovery plan must address how the city will pay back obligations owed to bondholders and tax appeal judgement orders. State officials have estimated the city has more than $500 million in total debt outstanding including $170 million in tax refunds owed to the Borgata casino.
"This legislation means no more business as usual," said Christie in a statement. "It embraces my demand that Atlantic City immediately account for every dollar it receives and spends and triggers a series of strict conditions and rigorous requirements the city must meet immediately."
Atlantic City Mayor Donald Guardian said in a statement late Friday he will begin the process of implementing a stabilization and recovery plan immediately upon returning to work from the holiday weekend Tuesday.
Guardian added that he is planning monthly meetings and welcomes feedback from stakeholders as the process takes hold.
"There will be a lot of tough decisions that will be need to be made over the next 150 days and there will a lot of sacrifices asked for by all," said Guardian. "But I believe that by working together we will be able to accomplish this historic mission. We will create a new Atlantic City that will be the shining example for years to come."
