Assigns A3 to $76M GO Bonds; city has $434M in GO debt outstanding
New York, June 24, 2015 --
Moody's Rating
Issue: General Obligation Refunding Bonds, 2015 Series A;
Rating: A3; Sale Amount: $55,000,000;
Expected Sale Date: 07-03-2015; Rating Description:
General Obligation
Issue: Taxable General Obligation Refunding Bonds, 2015 Series
B; Rating: A3; Sale Amount: $20,700,000;
Expected Sale Date: 07-03-2015; Rating Description:
General Obligation
Opinion
Moody's Investors Service has downgraded to A3 from A2 the rating on the
City of Hartford's, (CT) outstanding general obligation bonds,
affecting approximately $434 million of outstanding debt.
The outlook remains negative. Concurrently, Moody's has assigned
an A3 rating to the city's $76 million of General Obligation Refunding
Bonds, Series 2015 A and B.
SUMMARY RATING RATIONALE
The downgrade to A3 from A2 reflects: the city's weak financial
position which is evidenced by a continued reliance on one-time
revenue sources in order to balance the budget; a narrow reserve
position following a sizeable deficit in fiscal 2014 and modest expected
improvement in fiscal 2015, limited revenue raising ability in the
absence of tax increases, and diminished flexibility for future
expenditure reductions. The rating also incorporates sizeable pension,
OPEB and debt liabilities, as well as the city's standing as the
state capital and an important regional economic center, albeit
characterized by weak socioeconomic indices.
OUTLOOK
The negative outlook reflects our expectation that the city will remain
challenged to restore fiscal stability over the near term, given
its limited revenue raising flexibility, high fixed cost burden
and continued reliance on non-recurring revenues. The outlook
also incorporates the possibility for downward rating action should the
city fail to adopt structurally balanced budgets and augment its slim
reserve levels.
WHAT COULD MAKE THE RATING GO UP
• Established trend of structurally balanced operations
• Rebuilding of reserves to adequate levels
• Substantial tax base growth
• Significant improvement in socioeconomic indices
WHAT COULD MAKE THE RATING GO DOWN
• Protracted structural budget imbalance, including reliance
on one-time revenue sources
• Reduction of General Fund reserves
• Deterioration of the city's tax base or demographic profile
OBLIGOR PROFILE
Hartford is the capital and third largest city in Connecticut, with
an estimated population of 124,893.
LEGAL SECURITY
The bonds are secured by the city's general obligation unlimited tax pledge.
USE OF PROCEEDS
Both the Series A and Series B bonds will be used to restructure certain
outstanding maturities from the series 2005C, 2009, 2009A,
2010A, 2011A, 2012A & B, 2013B, and 2014B
& C bonds. The restructuring will result in an overall net
present value loss of $9 million. On a budgetary basis,
the restructuring will provide roughly $42 million in upfront cash
flow savings, which will be used to provide budgetary relief in
fiscal 2016 and 2017, with smaller savings from 2018 to 2020.
From 2021 to 2034 the city will recognize budgetary dis-savings
of approximately $52 million.
PRINCIPAL METHODOLOGY
The principal methodology used in this rating was US Local Government
General Obligation Debt published in January 2014. Please see the
Credit Policy page on www.moodys.com for a copy of this
methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain 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 certain 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.
The following information supplements Disclosure 10 ("Information Relating
to Conflicts of Interest as required by Paragraph (a)(1)(ii)(J) of SEC
Rule 17g-7") in the regulatory disclosures made at the ratings
tab on the issuer/entity page on www.moodys.com for each
credit rating:
Moody's was not paid for services other than determining a credit rating
in the most recently ended fiscal year by the person that paid Moody's
to determine this credit rating.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Thomas Compton
Analyst
Public Finance Group
Moody's Investors Service, Inc.
60 State Street
Suite 700
Boston, MA 02109
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Geordie Thompson
Vice President - Senior Analyst
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 Hartford, CT's GO to A3; outlook negative