Atlantic City, N.J.'s Caa1 rating from Moody's Investors Service was affirmed late Friday, with the rating agency maintaining its its negative outlook, citing uncertainty on whether there will be enough cash to make debt payments.
The rating affects $16 million of Moody's-rated debt. Atlantic City has $365 million in total debt outstanding, according to Moody's.
Moody's action comes on the heels of a Nov. 17 Moody's report saying that the gambling hub needs approval of three bills New Jersey Gov. Chris Christie conditionally vetoed to avoid becoming insolvent. One key element of the legislation Christie's vetoes placed in limbo would establish a payments-in-lieu of taxes program for casinos over a 15-year period.
"Affirmation of the Caa1 reflects continued uncertainty regarding the city's solvency and ability to meet debt service obligations in the near-term," said Moody's analyst Josellyn Yousef Dec. 11. "The Caa1 rating incorporates the city's very weak liquidity with current fund cash projected to fall below zero by April 2016 or sooner, absent a cash infusion from proposed Atlantic City fiscal recovery legislation or continued state support."
Yousef said the negative outlook remains due to large unsettled casino tax appeals, increased competition from new casinos opening in the northeast region and uncertainty over the city's large structural budget deficit.
Christie appointed corporate restructuring attorney Kevin Lavin as Atlantic City emergency manager last January triggering a six-notch downgrade by Moody's. Lavin issued a report last March urging "shared sacrifice" among stakeholders including bondholders and is slated to release a second analysis soon.