S&P cuts Hartford, Conn., GO rating by 4 notches to B-minus
S&P Global Ratings cut its rating on Hartford, Conn.'s general obligation bonds by four notches to B-minus from BB and the rating on the Hartford Stadium Authority's lease revenue bonds by three notches to B-minus from BB-minus, the rating agency said on Thursday.
S&P said the ratings are remaining on CreditWatch with negative implications, where they were placed on May 15.
In addition, S&P cut the rating on Hartford's 2017 tax anticipation notes to SP-3 from SP-2.
On Tuesday, Moody's Investors Service downgraded Connecticut's capital city two notches further into junk to Caa1 from B2. The rating is under review for yet another downgrade, Moody's said in a statement. The move affects roughly $550 million in debt.
Neither Fitch Ratings nor Kroll Bond Rating Agency rate Hartford.
"The downgrade to B-minus reflects our opinion that Hartford has capacity to pay on its obligations, but due to the current local and Connecticut political, economic, and financial environment, the city is more vulnerable to payment interruptions," said S&P credit analyst Victor Medeiros.
S&P said its actions also reflect the change in the state budget proposal from a recurring infusion of state aid in the city's base payment in the governor's second budget proposal to no additional recurring revenue in the third proposal. This third proposal, S&P said, includes a $46 million set-aside toward aiding distressed communities. The proposal also continues to include a tiered system of system support. Hartford would be able to access the $46 million made available, but under the tiers other distressed communities may also attempt to access this amount, according to S&P.
"Hartford's inability to reduce expenses on its own and achieve desired union concessions, and its lack of a plan to achieve structural balance support the downgrade," S&P said.
S&P said it could further lower the long-term rating if the city continues to seek a bond restructuring or distressed exchange, or file for bankruptcy, in lieu of other reforms or options that may be available with state assistance.
S&P said its negative CreditWatch status reflects the uncertainty over the city's potential restructuring and bankruptcy discussions, which it said will become more urgent as liquidity is likely to diminish further if a state budgetary impasse persists beyond October.
The downgrade of the TANs to SP-3 reflects S&P’s expectations that the city remains committed to the repayment of the TANs, but its current liquidity conditions are speculative and would likely worsen absent state action to assist the city. As such, the city is more vulnerable to payment interruptions.