Fitch Ratings increased the rate of public finance downgrades in the second quarter of this year compared to the first quarter.
The second quarter’s downgrade to upgrade ratio in par value was 3.6:1, compared to 2.5:1 in the prior quarter. The downgrade to upgrade ratio by rating action was 2.1:1, compared to 2:1 in the first quarter.
In the second quarter Fitch downgraded $13.5 billion in par value and upgraded $3.7 billion. In terms of actions, it downgraded 58 credits and upgraded 27 credits.
The second quarter was the 14th consecutive quarter where Fitch downgraded more credits than it upgraded.
By par amount Fitch’s largest downgrade in the quarter was to over $2.4 billion in Detroit debt. Fitch lowered $511 million in Detroit unlimited tax general obligation bonds to CCC from B. It dropped $453 million in Detroit limited tax general obligation bonds to CC from B-minus. It pushed down $1.5 billion in Detroit pension obligation certificates of participation to CC from B.
Fitch also downgraded Suffolk County, NY’s $1.35 billion in general obligation bonds to A-plus with a negative rating outlook from AA-minus. Fitch pushed North Las Vegas’ $437 million in limited tax general obligation bonds to BBB with a negative rating watch from A.
Fitch’s biggest upgrade in the quarter was raising $1 billion of Tampa Health System revenue bonds to AA from AA-minus.
At the end of the second quarter Fitch had 283 public finance credits with a negative rating outlook, compared to 67 with a positive outlook. Fitch also ended the quarter with 78 credits on negative rating watch but no credits on positive rating watch.
Fitch Ratings senior director Sarah Repucci and managing director Vincent Barberio presented Fitch’s actions in “U.S. Public Finance Rating Actions Second-Quarter 2012.” q