Moody’s Friday placed the B1 issuer rating and B2 general obligation limited tax debt rating of Pontiac School District, Mich. on review for possible downgrade after saying the district missed a debt payment scheduled for May 1.

Also last week, the state treasurer announced it is reviewing a preliminary report that says probable fiscal stress exists at the district. If the state board agrees with the report, it could appoint a financial review team to examine the district’s books, often the first step toward appointment of an emergency manager.

Moody’s downgrade comes after Pontiac schools missed a debt service payment of $1.6 billion of 2006 GOLT school building and site bonds, according to the ratings agency. The paying agent has submitted a claim to the bond insurer, Syncora Guaranty, for payment.

The state withheld its March and April state aid payments, which could have contributed to the missed payment, Moody’s said. The money was released on May 13 after the district submitted a deficit elimination plan, analysts said.

“The district has operated with very slim cash flow margins over the past two fiscal years following five consecutive operating shortfalls that contributed to a deficit general fund balance in fiscal 2009 and further worsening of the deficit through fiscal 2012,” Moody’s said in its report.

Pontiac has $15.7 million of outstanding general obligation limited-tax bonds. It had a deficit of nearly $38 million as of June 2012.

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