In a special report Monday, Fitch Ratings said negative rating actions against Florida credits last year outpaced positive actions by three-to-one, but the agency expects ratings to stabilize in 2010.
Fitch took negative actions, including downgrades and outlook revisions to negative, on 15% of 224 credits it rates in the state. They included 16 downgrades while Fitch took positive action on just 5% of the rated credits.
More than half of negative actions were for special-tax bonds supported by tourist, fuel, and sales taxes. The outlooks on all but two special-tax credits downgraded were revised to negative from stable, “reflecting Fitch’s expectation that the rating level could deteriorate further over the subsequent two years,” the agency said.
More highly leveraged issuers were more likely to be downgraded as revenue weakened so much they no longer provided adequate debt service coverage. Outlooks for such issuers were frequently revised to negative given the severity of the declines, the acceleration of the pace of declines, and uncertainty of the timing of meaningful recovery.
“Fitch expects ratings in Florida to stabilize in 2010 but anticipates a smaller number of additional rating and rating outlook changes to reflect individual issuer responses to local revenue conditions and spending pressures,” the report said. “Fitch expects special tax revenue declines to moderate in late fiscal 2010 and many to stabilize at 2005 levels.”