The state of Maryland has ended its relationship with Moody's Ratings by terminating its contract a few days before a sizable bond sale as market analysts ponder the repercussions.
"The state's bonds are currently evaluated similarly to the other top-rated states' GOs, and I expect good demand for this week's sale, particularly since the bonds will all be due inside of 15-years," said Patrick Luby, the senior municipal bonds strategist at CreditSights.
"I don't know that dropping a rating agency will necessarily impact pricing, but for the intermediate to longer-term, the market will be more interested in seeing how the state manages through the downsizing of the federal workforce."
Maryland has absorbed a series of financial hits since the start of the Trump administrations and estimates the state has lost about 25,000 federal jobs, "the most of any state in the nation."
The state is planning to come to market on Wednesday with an $800 million issue of tax -exempt general obligation bonds offered in a competitive sale. The proceeds will be used for various capital projects including education which is slated to receive 60%.
Fitch Ratings has the state as AAA with a stable outlook, S&P Global Ratings also goes with AAA but a negative outlook. KBRA has the offering at AAA with a stable outlook.
"The rating continues to be underpinned by the established track record of conservative budget management; moderate debt and continuing obligations profile," said KBRA.
"The rating places particular emphasis on the proven effectiveness of the state's budget management framework which is evidenced by consistent maintenance of prudent reserves through the full economic cycle over the last two decades."
S&P justified its position saying "growing budget pressures could lead to a lower rating if the state does not make timely adjustments and prioritize a sustainable plan to bring it back to structural balance."
Earlier this year Maryland battled a $1.5 billion budget shortage that was solved through financial juggling that included swapping bonds for cash and siphoning off some reserves.
KBRA began its relationship with Maryland in
The separation with Moody's was telegraphed by State Treasurer Dereck Davis
The tirade followed a
According to the road show for the upcoming sale, Maryland has exceeded the state's statutory minimum reserve fund levels by an average of $1.1 billion.
Maryland's Democratic Governor Wes Moore has tangled with the Trump administration over who is going to pay for
The dispute between Maryland and Moody's dates back to 2011 when the firm tagged the state with a negative outlook. It was revised to stable in 2013.
