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Related Issuers
Rating Action:

MOODY'S DOWNGRADES CITY OF RENO, NEVADA'S GENERAL OBLIGATION BOND RATING TO Aa3 FROM Aa2; NEGATIVE OUTLOOK AFFIRMED

Global Credit Research - 03 Jan 2012

RATING ACTION AFFECTS APPROXIMATELY $166 MILLION OF RATED DEBT

New York, January 03, 2012 -- Moody's Investor's Service has downgraded to Aa3 from Aa2 the rating on the City of Reno, Nevada's General Obligation (Limited Tax) Bonds. Moody's has affirmed the negative outlook. The downgrade and negative outlook affect $7.4 million of GOLT bonds, $92.5 million of GOLT/Revenue bonds, $45.0 million in GOLT medium term bonds, and $21.9 million of assessment bond backed by the city's GOLT pledge. The GOLT and GOLT medium-term bonds are secured by the full faith and credit of the city within the constitutional and statutory limitations of the city's operating levy. GOLT/Revenue bonds are additionally secured by a pledge of net revenues from various city enterprise systems.

SUMMARY RATING RATIONALE

The downgrade to Aa3 from Aa2 primarily reflects Moody's view that currently low reserve levels and continued financial challenges combined with regional and local economic weakness places the city in a difficult position over the near- to medium-term. Key rating drivers include a trend of operating deficits which has resulted in a drawdown of reserves to support general government operations as well as declines in taxable values.

The negative outlook reflects Moody's expectation that reduced financial flexibility, low reserve levels and a slow economic recovery will continue to pressure the City's limited financial resources and ability to improve reserve levels in the near-term.

STRENGTHS

-Low business costs relative to California

-Manageable debt burden

CHALLENGES

-Narrow financial position and reduced budgetary flexibility

-Continued economic weakness reflected in high unemployment and still declining house prices

Outlook

The negative outlook reflects Moody's expectation that reduced financial flexibility, low reserve levels and a slow economic recovery will continue to pressure the City's limited financial resources and ability to improve reserve levels in the near-term.

What could change the rating - UP (Remove Negative outlook)

- Demonstrated progress in rebuilding reserve levels through structurally balanced operations

- Sustained economic improvement that leads to positive revenue growth and lower unemployment in the region

What could change the rating - DOWN

- Continued, significant economic slowing, with sustained weakened revenue performance

- Lack of demonstrable improvement in reserve levels relative to similarly rated peers

- Further depletion of reserves

The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 31 January 2012. ESMA may extend the use of credit ratings for regulatory purposes in the European Community for three additional months, until 30 April 2012, if ESMA decides that exceptional circumstances arise that may imply potential market disruption or financial instability. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings and public information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Dan Steed
Asst Vice President - Analyst
Public Finance Group
Moody's FIS Domestic Sales Office - San Francisco CA
One Sansome St. Suite 3100
San Francisco, CA 94104
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Matthew A. Jones
Senior Vice President
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

MOODY'S DOWNGRADES CITY OF RENO, NEVADA'S GENERAL OBLIGATION BOND RATING TO Aa3 FROM Aa2; NEGATIVE OUTLOOK AFFIRMED
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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