Moody's Investor's Service downgraded $282 million of Atlantic City, N.J.-related bonds to near junk grades citing declining revenue in the gambling destination.
Moody's on Tuesday cut the ratings on the Casino Reinvestment Development Authority's parking fee and Atlantic City Fund revenue bonds, series 2005A and 2005B, to Baa3 from Baa2. The downgrade affected $216 million.
In addition, Moody's downgraded the Casino Reinvestment Development Authority's hotel fee revenue bonds, series 2004, to Baa2 from Baa1, affecting $66 million in debt.
The outlook remains negative on all the bonds.
Three revenue sources back the parking bonds, two of them parking fees. The fees provide 71% of the bonds' revenue, said Moody's analyst Vito Galluccio and vice president Julie Beglin. However, the non-parking fee revenue is scheduled to sunset in 2019.
Parking fee revenue has generally been declining in parallel with the decline of Atlantic City's gaming industry, they said. The rating also reflects the city's concentrated economic base, as well as a weakened debt service coverage ratio.
The hotel bonds are supported by fees on occupancy of the hotel rooms.
The downgrade reflects the decline in Atlantic City hotel occupancy rates, the city's very concentrated economic base, and the issuer's inability to raise the per room fees without state legislative approval.
Moody's rates Atlantic City government general obligation bonds Baa2 with a negative outlook.
