Connecticut Capital Hartford Downgraded To Junk By S&P

Tyler Durden's picture

One week ago, Illinois passed its three year-overdue budget in hopes of avoiding a downgrade to junk status, however in an unexpected twist, Moody's said that it may still downgrade the near-insolvent state, regardless of the so-called budget "deal." In fact, a downgrade of Illinois may come at any moment, making it the first U.S. state whose bond ratings tip into junk, although as of yesterday, credit rating agencies said they were still reviewing the state's newly enacted budget and tax package. The most likely outcome is, unfortunately for Illinois, adverse: "I think Moody's has been pretty clear that they view the state's political dysfunction combined with continued unaddressed long-term liabilities, and unfavorable baseline revenue performance as casting some degree of skepticism on the state's ability to manage out of the very fragile financial situation they are in," said John Humphrey, co-head of credit research at Gurtin Municipal Bond Management.

And yet, while Illinois squirms in the agony of the unknown, another municipality that as recently as a month ago was rumored to be looking at a bankruptcy filing, the state capital of Connecticut, Hartford, no longer has to dread the unknown: on Tuesday afternoon, S&P pulled off the band-aid, and downgraded the city's bond rating by two notches to BB from BBB-, also known as junk, citing "growing liquidity pressures" and "weaker market access prospects", while keeping the city's General Obligation bonds on Creditwatch negative meaning more downgrades are likely imminent.

"The downgrade to 'BB' reflects our opinion of very weak diminished liquidity, including uncertain access to external liquidity and very weak management conditions as multiple city officials have publicly indicated they are actively considering bankruptcy," said S&P Global Ratings credit analyst Victor Medeiros. Hartford has engaged an outside law firm with expertise in financial restructuring. Officials also mentioned that the city would initiate discussions with bondholders for concessions to implement a debt restructuring if it didn't receive the necessary support in the state's 2019 biennial budget.

S&P also said that Hartford may be downgraded again if the state passage of a budget is significantly delayed, or if the city were not to receive sufficient support in a timely manner that would enable it to manage liquidity and allow it to meet obligations in a timely manner.

In short: the capital of America's richest state (on a per capita basis), will - according to S&P - be one of the first to default in the coming months.

Full S&P note below.

Hartford, CT GO Debt Rating Lowered Two Notches To 'BB' On Growing Liquidity Pressures, Weaker Market Access Prospects

 

S&P Global Ratings has lowered its  rating on Hartford, Conn.'s general obligation (GO) bonds two notches to 'BB'  from 'BBB-' and its rating on the Hartford Stadium Authority's lease revenue  bonds to 'BB-' from 'BB+'. The ratings remain on CreditWatch with negative  implications, where they were placed on May 15, 2017.

 

"The downgrade to 'BB' reflects our opinion of very weak diminished liquidity, including uncertain access to external liquidity and very weak management conditions as multiple city officials have publicly indicated they are actively considering bankruptcy," said S&P Global Ratings credit analyst Victor Medeiros. Hartford has engaged an outside law firm with expertise in financial restructuring. Officials also mentioned that the city would initiate discussions with bondholders for concessions to implement a debt restructuring if it didn't receive the necessary support in the state's 2019 biennial budget.

 

"Maintaining the CreditWatch with negative implication reflects our opinion of continued liquidity pressures related to whether the state will provide timely extraordinary aid to the city as outlined in the governor's proposed biennial budget and included in the city's adopted budget," said Mr. Medeiros. Connecticut is facing its own fiscal challenges, and there has been very little indication by the legislature on how it intends to address local government aid and specifically the level of budgetary support it would provide the city of Hartford.

 

The city's full faith and credit GO pledge secures the bonds and notes outstanding. The 'BB-' rating on the lease-revenue bonds issued by The Hartford Stadium Authority reflects the appropriation risk of the city of Hartford.

 

"We expect to resolve the CreditWatch on the long-term rating with the enactment of a state budget that will provide additional information and allow us to evaluate the level of state support and the city's overall liquidity," added Mr. Medeiros. At the moment, we believe there is a one-in-two likelihood of a negative rating action, potentially by multiple notches. Factors that could lead to a downgrade would be if the state passage of a budget is significantly delayed, or if the city were not to receive sufficient support in a timely manner that would enable it to manage liquidity and allow it to meet obligations in a timely manner. Alternatively, if timely budget adoption translates into stabilized liquidity, and provides long-term structural support, we could remove the ratings from CreditWatch.

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Boris Gudonov's picture

Liberal Democrats and their union buddies destroy every state and every city they take control of.  Now they will demand moar money from the federal government, i.e., from every US citizen with sense enough to stay away from these liberal disaster areas.  And of course the people of Connecticut will flood out, bring their liberal disease with them.

Bigly's picture

Believe me, if I flood out I will NOT be bringing the liberal disease.

If you are european white, not jewish, and in the private sector there is a greater than 50% chance you are not a commie statist...even in CT.

The reliable blue votes are govt and unions, blacks, jews (non orthodox), and to some degree puerto ricans. And the democratic town committees are run like machines.

They call their dem voter rolls and independents. "You want an absetee ballot or a RIDE to the polls?":They take your name and make sure you vote. The Republicans do not do this. They are LAZY AND DEFEATIST ineffective assholes.

pine_marten's picture

What will the domino effect be? And how quickly will it accelerate?  Will there be time to get out of the way?  

CheapBastard's picture

Contracts with gubmint employees need to revert to realism like much of the private sector has already done.

williambanzai7's picture

Bonds, Insane Bonds...

silverer's picture

And even more insane obligations! Pensions, insane pensions.

Yen Cross's picture

 Everything is "range bound" because there's NO price discovery. [volatility]

any_mouse's picture

I thought "Connecticut Capital Hartford" was an insurance company. Could not understand what the State of Illinois had to do with the story.

detached.amusement's picture

You are thinking of THE Hartford - who has already sold off all of their seed corn just to stay in existence after 08 - and who will promptly go the way of the dodo the next "significant" market event.  They are no longer really an insurance company, although they do still have the AARP  whoopie cushion to sit on for now - its not a "financial services" company, which means they play at the casino and everything's going to look great, until its not, then the executives will take their multimillion dollar payouts while the rest get shit on, laid off, etc.

silverer's picture

I'm remembering a blog post a couple of years back from some guy on a liberal web site, the "Something Democrat" or whatever, making fun of flyover conservative America while he was bragging about how much higher the average salaries were in democratic liberal CT. I didn't reply to his post. But he's getting one now anyway. lol

Bigly's picture

Well they are higher on avg. And obviously not when compared  with ny boston la or sfo...But I can tell you the last 10 years there has been major pressure suppressing decent increases and H1Bs have fucked over IT just like in other areas of the country. Plus the fact that insurance companies have decentralized their ops elsewhere is not helping. More people locally competing for those 150k jobs means they are not asking/getting 175k-200k.

CT is unrecognizable and it's been accelerating BIGLY in the last 10 years. Not muffy and skippy, but half of bangalore, low rent blacks, PRs, and some Asians. Jews are leaving. They will bring their blue votes to your states. Count on it.

StageCoachDriver's picture

The IL solution was to tax more rather than spend less. Hartford needs to examine the out going and worry less about the in coming.

Once, states could survive on a 3% sales tax - that's when a carton of cigarettes cost $2.82 for reg and $2.97 for king size. Overall, government spending has grossly outpaced inflation and they want to spend more and therefore take more, leaving the forgotten man with less for himself and his family.

RICKYBIRD's picture

The  Dems here in CT jacked taxes way up about five years ago - then they immediately spent it, including a new state Earned Income Tax Credit for their base which has spewed out about $600 million in free cash to no income/low income filers. They raised taxes on homeowners by $300 a year at the same time by eliminating the home owners' state tax credit - an obvious wealth transfer. Tax on gas was raised by $.04 a gallon. Did this money go to restore ailing roads and bridges infrastructure? No, it went straight into the General Fund. I could go on. In 20-25 years the Dems have turned the best run state in the union into a shithouse.

sinbad2's picture

How much for your women, I buy your women, how much?

chosen's picture

One goat, one pig, 25 pounds of dung, a large tree branch, and a small yellow plastic bowl.

New_Meat's picture

Watch as the "Insurance" companies spin off their "Annunity" businesses to "better serve their customers."

Drop-Hammer's picture

Another city down the shitter because of Democrat/corruptocrat/jew/libtard corruption and a huge welfare nigger population.

Haitian Snackout's picture

There will be an answer.......Double B.

 

Benito_Camela's picture

Would this be the same S&P that slapped AAA ratings on toxic Goldman sludge and enabled them to hock it off on retirement funds worldwide? 

Why are any of these ratings agencies still in business? 

chosen's picture

"The racial makeup of Hartford was 29.8% white, 38.7% African American or black, 0.6% Native American, 2.8% Asian, 0% Pacific Islander, 23.9% from other races, and 4.2% from two or more races. 43.4% of the population were Hispanic or Latino, chiefly of Puerto Rican origin.[62] Whites not of Latino background were 15.8% of the population in 2010,[63] down from 63.9% in 1970." -  Wikipedia

This explains it all.  Only 15.8% white in 2010, down from 63.9% in 1970.  Must be a real multi-cultural shit-hole.

Déjà view's picture

Did not know Brazil also has a Hartford...

Almost done with WALL?

HRH Feant2's picture

My grandfather was quite a big wig in Hartford back in the day. Never met him. My father could have learned a lot if he had bothered to listen, but, like many young men my father had one imperative: his dick.

Grandfather was able to contribute as captain of the polo team and as an architect his name is on a few buildings in Hartford. It doesn't take very long for a family to fall, and fall hard. I know. I hate my father for throwing away his legacy and not being able to keep his fucking pants zipped.

My grandfather? Glad he passed away many years ago and doesn't have to see a once great city ruined by niggers and communists. That would have made him sick.

More_sellers_than_buyers's picture

Why doesn't anyone go to jail for lack of fiduciary responsibilty???? I knew a guy who was involved in a wall street bankruotcy in the 80's . He opten explained to me he was scared shitless when selling off assests because he thought the judge would throw him in the clink if he did not get top dollar for every paper clip.  Dude took his job seriously even though it wasn't his job becuse he had a conscience.  Throw these deal makers in the clink.  The only way this shit will ever stop!

what happened's picture

It is about their pension debt.  They are underfunded and swimming in it.  No sensible citizen will stay to support all the government workers retiring.  The property taxes are ever increasing, as are the regulations.  It is hell.