Moody's Investors Service downgraded various debt supported by Stockton, Calif.'s general fund to Caa3 after the city announced it would skip payments as it enters bankruptcy.

Moody's believes that the magnitude of the budget gap and heavy reliance on debt service reductions as part of the budget solutions is an indication of the likelihood of a high level of losses that the city's pension obligation and lease bonds would experience in bankruptcy, the rating agency said in a report Wednesday.

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