SAN FRANCISCO — Standard & Poor's downgraded Vallejo's certificates of participation to an underlying C rating from B yesterday as the California city inched closer to completing a bankruptcy restructuring that may include a debt-service moratorium.

The action affects $4.8 million of COPs sold in 1999. The San Francisco Bay Area city has made reduced payments on $53 million of general-fund backed debt under the bankruptcy court's protection and is trying to negotiate an adjustment plan that delays debt payments for several years.

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