NEW: Rating Agency Reacts to Central Falls Bankruptcy
Tuesday, August 02, 2011
Moody’s Investors Services is reviewing Central Falls’ already poor bond rating of Caa1 for a possible downgrade—an announcement that came the day after the financially struggling city filed for bankruptcy.
A downgrade would affect approximately $20.8 million in outstanding debt.
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The city’s rating could go up, according to Moody’s, if it improves funding for long-term liabilities, adopts a bankruptcy plan that preserves “priority lien” of the city’s general revenues for bondholders, and emerges from bankruptcy with a balanced budget.
The rating could go down, on the other hand, if bankruptcy becomes a prolonged process, the city is unable to improve funding for long-term liabilities or secure more state aid for the current year, and there are successful legal challenges to the bankruptcy filing.
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