Teetering Hartford, Conn., received its latest downgrade on Thursday afternoon as Moody’s Investors Service lowered the city’s rating deeper into junk, to B2 from Ba2.
The outlook is negative. Moody’s had placed Hartford under review for downgrade on May 30.
S&P Global Ratings on Tuesday pushed Connecticut’s capital city two notches into speculative grade, to BB from BBB-minus. Moody’s Investors Service already pegged Hartford down to junk, at Ba2.
“The downgrade reflects the increased likelihood that the city will pursue debt restructurings to address its fiscal challenges,” Moody’s said in a statement, noting that Mayor Luke Bronin’s administration hired Greenberg Traurig LLP as restructuring counsel, and has talked publicly about bringing bondholders to the table for a debt restructuring.
Hartford projects a fiscal 2018 deficit of $50 million and is seeking an additional $40 million in aid from the state to close that gap. The state, however, is locked in a budget impasse and is already late with its fiscal 2018 spending plan.
“Even if the state's biennial budget allocates sufficient funds to address the current and following years deficits and create a fiscal oversight structure, the budget is still unlikely to provide a pathway to structural balance over the longer term,” said Moody’s.
Deficits, partially due to escalating debt service costs from pushed-out restructurings, are projected to spike to $83 million by 2023. That, said Moody’s, “makes the city's weak financial position vulnerable to further deterioration.”
Keeping Hartford out of Chapter 9 will need collaboration, Gov. Dannel Malloy said in New York on Wednesday.
“We have to do something, they have to do something,” he told a told a Municipal Forum luncheon gathering in Midtown. “I’d prefer we avoid bankruptcy, but I’m not sure that can be done. It can’t be done unless people come to the table.”