Standard & Poor's Ratings Services lowered its issuer credit rating (ICR) to 'D' from 'SD' (selective default) on Stockton, Calif. The outlook is not meaningful.

In addition, Standard & Poor's lowered its issue ratings to 'C' from 'CC' on the city's pension obligation bonds, lease revenue bonds, and certificates of participation (COPs), some of which were issued by the Stockton Public Financing Authority and the Stockton Redevelopment Agency. The outlook on these ratings is negative.

"The 'D' ICR reflects our view of the city's planned nonpayment of substantially all of its obligations as they come due," said Standard & Poor's credit analyst Chris Morgan. "Additionally, we understand the city plans to file for bankruptcy protection under Chapter 9 of the U.S. Bankruptcy Code," Mr. Morgan added.

The negative outlook on the city's lease revenue bond and COP rating reflects our view that we could further lower the rating in the next year as debt service reserves, sureties, and restricted funds (which are currently paying bondholders or pending payment to same in the absence of appropriated general funds) are exhausted and/or otherwise not paid to bondholders in bankruptcy. The negative outlook on the pension obligation bond rating reflects our understanding of the city's planned non-payment of debt service in September and the lack of other enhancements.

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