Moody's Investors Service has downgraded Atlantic City Municipal Utilities Authority's (NJ) rating to B3 from B2, affecting $7.5 million of $16.6 million of net water revenue debt outstanding. The outlook remains negative.
The B3 reflects heightened risk to MUA bondholders given the authority's governance relationship with Atlantic City (Caa3 negative) and the possibility for a dissolution of the MUA, which would bring it under city control as the city's fiscal crisis worsens. The city would assume responsibility for making debt service payments, a major credit negative given the city's precarious finances. The rating also reflects the authority's currently adequate debt service coverage, low debt burden, sum-sufficient rate covenant, and a cash funded debt service reserve fund.
