Standard & Poor’s Thursday suspended the underlying BB rating on West New York, N.J.’s general obligation debt and removed it from credit watch, where the rating agency had placed it with negative implications on Sept. 16.
“The rating suspension reflects Standard & Poor’s lack of receipt of timely information of satisfactory quality from the issuer, in accordance with its policies,” S&P said in a statement.
The suspension affects about $10 million of outstanding debt, including $4.04 million of Series 2003 pension refunding bonds insured by National Public Finance Guarantee Corp., and $6.1 million of Series 2007 A general improvement bonds insured by Ambac Financial Group.
West New York, with a population of just under 50,000, sits across the Hudson River from New York City. Messages seeking comment were left with Mayor Felix Roque.
“National Public Finance Guarantee Corp. has approximately $3.7 million of insured exposure to the general obligation debt of West New York, N.J., through its reinsurance agreement with Financial Guaranty Insurance Company,” said Kevin Brown, director of corporate communications for the company.
“As is the case for all of its policies, National stands behind the insured bonds and policyholders can rest assured that they will receive their principal and interest payments on time and in full.”
An Ambac spokesman said that the insurer does not comment on specific policies.
According to Standard & Poor’s, the town failed to provide timely information about its current and projected liquidity position. The agency cited “significant fiscal stress” when it placed West New York on credit watch with negative implications in March 2009.
In 2010, cash levels were expected to be negative in August before the third-quarter property tax payments due in September. While the town’s 2010 year-end liquidity was adequate, in Standard & Poor’s opinion, the town’s current liquidity position is unclear.
“We have continually focused on liquidity and financial issues the last couple of years with West New York. We felt we needed updates on their cash flow, both current and projected, and we have not received that,” Robin Prunty, a managing director for public finance ratings at S&P, said in an interview.
“They’re really opaque,” Alan Schankel, a managing director at Janney Capital Markets in Philadelphia, said of the town. “It looks like a bunch of minor [reporting] deficiencies, but they add up.”
Schankel said the rating agencies are scrutinizing reporting information, or lack of it, with renewed vigor.
“Specifically, Standard & Poor’s is concerned that there’s not the proper reporting of their finances,” he said. “They’re trying to get more information.”
“It’s a positive that S&P, and also Moody’s lately, are dropping these bombs, for not getting the information and applying multi-notch downgrades when necessary, to reflect their displeasure,” Schankel added.
Yonkers, N.Y., Collingswood, N.J., Scranton, Pa., and Scranton’s county, Lackawanna, are among the Northeast localities that have received multi-notch downgrades recently from the major rating agencies.