Standard & Poor's Ratings Services said it lowered its rating on San Bernardino, Calif.'s series 1997A lease revenue refunding bonds to CC from BBB-plus.
In addition, Standard & Poor's placed the rating on CreditWatch with negative implications.
"The CC rating reflects our view of the city's willingness to meet its financial obligations following the city council's decision to file for protection under Chapter 9 of the federal Bankruptcy Code," said Standard & Poor's credit analyst Li Yang. "In addition, in a recent city council report published on June 26, 2012, management reports the city has depleted a substantial amount of its operating cash, which could impair its ability to meet its ongoing financial obligations," added Yang.
The CreditWatch with negative implications reflects Standard & Poor's understanding that the city could file for bankruptcy protection in the next three months. The CreditWatch listing also reflects its view that the city's insufficient liquidity could cause the city to fail to meet its ongoing financial obligations during the next three months. This could affect the city's ability to pay the next lease payment, which supports its 1997A lease revenue bonds and which is scheduled for Sept. 1, 2012.