WASHINGTON — Most of Moody's Investors Service's public finance rating changes last year were downgrades, but the par value of upgrades rose to the highest level since 2010, the rating agency said in a report released Monday.
Downgrades accounted for 79% of rating changes during the year, which is similar to the 82% of revisions in 2012 that were downgrades, Moody's said.
However, the amount of downgraded par value decreased by nearly one third in 2013, to $208 billion from $311 billion. The amount of upgraded par value increased by 68% in 2013 to $41 billion from $24 billion, the rating agency said.
In the fourth quarter of 2013, 69% of rating changes were downgrades, which is the lowest quarterly level since 2010, Moody's said. Overall, Moody's made 12% fewer rating changes in 2013 than it did in 2012.
"The rating activity is consistent with recent revisions of most of our sector outlooks to stable from negative, many becoming stable for the first time since the recession began," Chandra Ghosal, a Moody's analyst who coauthored the report, said in a news release. "Despite increased stability, pockets of credit pressure remain throughout the country, and we do not expect credit conditions to change materially over the next 12-18 months."
There were four upgrades and nine downgrades of state and state-related credits last year. The previous year, there were five upgrades and 42 downgrades in this category. The amount of downgraded state and state-related debt decreased in 2013 to $47.6 billion from $127.3 billion in 2012, Moody's said.
The rating agency said it made 120 upgrades and 514 downgrades in the local governments sector in 2013. There were several more upgrades and nearly 100 fewer downgrades in the sector in 2013 than in the previous year. The amount of upgraded local government debt nearly quadrupled in 2013 to $20.2 billion from $5.3 billion the previous year, and the amount of downgraded debt decreased slightly, Moody's said.
Most local governments have been able to maintain healthy financial positions due to cost-cutting, the housing market recovery, resilient property tax revenues and the stabilization of cuts in intergovernmental aid, the rating agency said.
Downgrades made up 58% of rating changes in the not-for-profit hospital sector last year, with 27 upgrades and 37 downgrades. Moody's said that it expects downgrades to continue to outnumber upgrades in this area this year "as pressure on all revenue sources continue and the unique challenges of the [Affordable Care Act] cause margin contraction."
Roughly 75% of the 2013 rating changes in the higher education and other not-for-profit area were downgrades, but downgrades made up 92% of rating changes in the sector the previous year, Moody's said.
Moody's made 10 upgrades in the infrastructure sector in both 2012 and 2013, but there was a larger number of downgrades in 2013. However, almost twice as much outstanding par was upgraded in 2013 than in the previous year, while the amount of outstanding par downgraded was smaller.
There were 13 upgrades and 48 downgrades in the housing sector last year, and the downgrades were primarily driven by updated methodology, Moody's said.
