After years of downgrades, Atlantic City’s credit got a boost thanks to the state takeover.
Standard & Poor’s upped its rating for the city to CCC from CC and said the city’s outlook is developing. The city’s credit rating was so low it was essentially unable to borrow money.
The credit bump is due to the state takeover and the recent deal resolving Borgata Hotel Casino & Spa’s outstanding property-tax appeals, S&P said. But it believes the city is still on shaky financial footing and the possibility of default is around 50 percent, S&P Global Ratings credit analyst Timothy Little said in a statement.
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“In our opinion, Atlantic City’s obligations remain vulnerable to nonpayment and, in the event of adverse financial or economic conditions, the city is not likely to have the capacity to meet its financial commitment,” Little said.
The city will borrow to pay for the $72 million Borgata settlement under the state’s Municipal Qualified Bond Act, allowing it to use the state’s credit rating.
The city has upcoming debt-service payments of $675,000 due April 1, $1.6 million May 1, $1.5 million June 1, $3.5 million Aug. 1 and $6.4 million Nov. 1.
Bankruptcy also still is an option, despite the state takeover, if the city’s structural imbalance isn’t improved in the near future.
The ratings agency criticized the lack of a credible plan to help the city reach long-term fiscal stability.
Gov. Chris Christie said in a statement the ratings upgrade along with plans by Hard Rock to reopen the former Taj Mahal Casino Resort show the state takeover of the city’s finances is beneficial. “These are early signs our efforts are working, that we will successfully revitalize Atlantic City and restore the luster of this jewel on the Jersey Shore,” he said.