Hartford, Conn., whose mayor has acknowledged bankruptcy as a serious option, received another downgrade on Monday as S&P Global Ratings lowered the city’s general obligation bonds to BBB-minus from BBB.
S&P also lowered the city’s rating on the Hartford Stadium Authority's lease revenue bonds to speculative-grade BB-plus from BBB-minus, and placed the ratings on credit watch with negative implications.
"The downgrade and the credit watch placement reflect the heightened uncertainty on whether the state will increase intergovernmental aid or otherwise lend the necessary state support to enable Hartford to achieve structural balance and prevent it from further fiscal deterioration," said S&P credit analyst Victor Medeiros.
Mayor Luke Bronin last week acknowledged that the city has put out feelers for bankruptcy counsel, should it have to file under Chapter 9. His proposed $613 million fiscal 2018 budget before the City Council acknowledges a $50 million shortfall.
Moody’s Investors Service in 2016 lowered Hartford GOs to a junk-level Ba2.
"Hartford’s position as the state capital and regional economic and employment center is a positive credit factor; however, those strengths are offset by depressed wealth and income levels, and high tax payor concentration," Stoever Glass & Co. said in a commentary.
The city has $550 million total debt outstanding.
The city has requested has requested an additional $40 million in aid from a state that itself is reeling. "It is unclear whether there is support in the General Assembly for bailing out Hartford," said Stoever Glass.
Connecticut received downgrades from Fitch Ratings and Moody’s on Friday and Monday, respectively, putting it with Illinois and New Jersey as states with GO ratings below double-A.
According to Medeiros, uncertainty over state aid prompted Hartford to seek solicitations for a bankruptcy lawyer.
“While a bankruptcy filing remains distant, in our opinion, by raising the possibility, we believe that elected officials are seeking to better understand the legal qualifications, process, and consequences associated with this action if there is no budgetary support at the state level,” he said.
Bronin’s 125,000-population city received four-notch downgrades from S&P and Moody’s Investors Service last year, both of which cited rising debt-service payments, higher required pension contributions, health-care cost inflation, costly legal judgments from years past and unrealized concessions from most labor unions.