LOS ANGELES — Hercules, Calif., officials said they plan to seek to have the city's CCC-plus rating from Standard & Poor's reinstated.
S&P analysts said in a report they suspended the rating June 28 due to the lack of audited financial statements for 2011.
City officials said they did not realize their junk bond rating had been suspended, when they listed the CCC-plus rating in a release attached to the city's tender offer.
The city found out about the rating suspension Friday when this reporter phoned seeking a response about the incorrect information included in the release. An S&P spokesman had notified the Bond Buyer the rating had been suspended on June 28, 2013 and confirmed incorrect information was included in the release.
Nickie Mastay, the city's finance director, said she and RBC, the underwriter, checked S&P's website before they sent out the information about the tender offer, but failed to see the suspension report.
A memo has been sent to the Depository Trust Company with information about the rating suspension, Erin Pham, an associate with law firm Orrick, Herrington & Sutcliffe LLP, said Monday in an email. The trustee also was asked to post an event notice on the Municipal Securities Rulemaking Board's EMMA website.
The rating agency report said the suspension was due to the lack of audited financial statements for 2011. Mastay said the audited financial statement came out in August, which she told S&P would happen in discussions prior to the suspension.
City officials are expecting to have completed audited financial statements for fiscal 2012 in late March and for fiscal 2013 in April.
Mastay said the officials plan to speak with S&P about getting the ratings reinstated. The suspension applied to all of the city's ratings, not just those referenced in the tender offer.
The city had agreed to retire $13 million in refunded electric revenue bonds as part of a $9.5 million deal struck with investor-owned utility Pacific Gas & Electric in May 2013 to buy the city's Hercules Municipal Utility. The tender offer also warned that if the tender offer fails to attract enough buyers, the city may default on the bonds. The offer period ends at 5 p.m. EDT on March 28.