Connecticut Capital Hartford Downgraded To Junk By S&P

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.

Comments

GUS100CORRINA Tue, 07/11/2017 - 18:24 Permalink

Connecticut Capital Hartford Downgraded To Junk By S&PMy response: ROFL!!!! No wonder GE moved its headquarters. They were getting out while the 'gettin' was good.

itstippy The_Juggernaut Tue, 07/11/2017 - 20:26 Permalink

For decades municipal bonds were considered rock solid because municipalities had "the power of taxation".  Conservative investors gobbled up municipal bonds.  To this day the principle and interest on municipal bonds is considered a "core" expense, and the first in line for payment when money gets tight.  Prior to bankruptcy Detroit turned off half their street lights and laid off half their cops and sanitation workers but didn't stop paying the principle and interest on their municiple bonds.  When municipal bonds are imperiled, things are very bad.  It's the end of "extend and pretend".  Hartford must be in very deep financial shit.

In reply to by The_Juggernaut

Bigly Uncle Sugar Tue, 07/11/2017 - 22:55 Permalink

I stopped watching the locals over 10 years ago.Consequently, i probably miss some local incidents. But i cannot suffer through their statist shit to get to it.WFSB's Scot Haney is insufferable. He literally makes me gag.WVIT is worse than WTNH.  But they all suck. If you must watch WTIC FOX is the best of a crappy bunch. I want to see the spin tomorrow. If they do not put forth a drastically cut budget, i want to see heads roll. Anyone in politics over the last 20 years contributed to this debacle 

In reply to by Uncle Sugar

izzee Tue, 07/11/2017 - 18:27 Permalink

But wait But wait But wait
Isn't Hartford Conn the HOME of the Insurance Industry. They all got them tall buildings with their Names up near the top.

Oh wait, I'm thinking of Hartford BOB...Before Obama n Bush

Wasn't Poppa Bush and the whole clan spawned in Conn?

Not to mention My Home Town Chicago, Chicago...Obama Town...etc

roddy6667 BlackSun59 Tue, 07/11/2017 - 20:15 Permalink

You left out all the churches, religious organizations, non-profit organizations and charities, and the like. Their state offices are always in the capitol. Add to this the vast network of city parks that don't pay taxes, but need taxpayer support. Back at the turn of the century (1900), Hartford was the nation's richest city. By the time I was a Realtor in Avon in the late Eighties, Hartford was the nation's fourth poorest city. My trusty Glock always accompanied me whenever in Hartford.

In reply to by BlackSun59

roddy6667 izzee Tue, 07/11/2017 - 20:08 Permalink

I remember Prescott Bush. the elder Bush who was a CT senator when I was a kid. Back then CT was a well-run state. We had the best highways in the country, jobs were plentiful, schools were good. Later, the cities of Hartford, New Haven, and Bridgeport became hellholes of black and Puerto Rican slums with high crime rates. All the ZH-ers like to pile on and call CT a liberal state, but it is about 49/51% liberal/conservative. But that's the tyrrany of the majority you get with democracy.There is no political solution. As long as the minorities are allowed to vote, things won't change. In the Fifties, a lot of upwardly mobile blacks came to the North for jobs. Welfare allowed the next generation to live without working and single mothers to keep having more babies. As long as the recipient of government policies are allowed to vote themselves a part of the public treasury, CT's big cities and all of America will spiral into failure. All democracies take this route.

In reply to by izzee

Amendment X roddy6667 Tue, 07/11/2017 - 22:12 Permalink

I'm a raised-in-the-country-small-town southern person now living in DFW area. You guessed it, I'm a true conservative. GUARANTEE you CT does not consist of 49% conservatives. 49% Republican... maybe.  Never lived in any big northern city, nor will I ever. I did work for one of those major Hartford insurance companies and traveled there multiple times. Those trips absolutely convinced me that Hartford in the 90's was in a pure state of decline. And to think some of the arrogant locals thought so highly of the place and snubbed their nose at anything TX or south of the Mason-Dixon line. Arrogance everywhere. 

In reply to by roddy6667

any_mouse roddy6667 Wed, 07/12/2017 - 01:18 Permalink

"a lot of upwardly mobile blacks"

Put a number on that? <500, <1,000?

Prescott Bush? Everything CT got was stolen from someone else.

Prescott had to be reprimanded twice about funding the Third Reich before he got sneakier about it.

Son: GHWBush - Dallas 1963. Gulf War 1.

Grandson: GWBush - 9/11. The ongoing War on Terror. Invasion of Iraq.

In reply to by roddy6667

vegas Tue, 07/11/2017 - 18:31 Permalink

Another blue state model bites the dust; who the hell would want to live in this shitbox and get taxed to death, while Pols line their pockets and tell you you're greedy and aren't paying your fair share. What a fucking joke. It's a bitch when you run out of other peoples money isn't it Libtards? www.traderzoogold.blogspot.com

all-priced-in Tue, 07/11/2017 - 18:35 Permalink

Good time to do a 100 year bond offering - Do it at a 10% interest rate - but defer interest payments until maturity. It would be over subscribed and would sell for over face value. Winning!!        

Sam Spayed Tue, 07/11/2017 - 18:35 Permalink

Now they have to think of a way they can go bankrupt and screw the bondholders up the azz, while still paying the outrageous pensions to the public employees who did 20 years of menial labor.

TrustbutVerify Tue, 07/11/2017 - 18:39 Permalink

Decades upon decades of excessive spending and even more excessive entitlement promises into the future...and shouting down, with every means necessary, of those that for decades upon decades said it wouldn't work.

CHoward Tue, 07/11/2017 - 18:54 Permalink

"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" THINK about that for a minute.  Let it sink in. 

Ben A Drill Tue, 07/11/2017 - 19:19 Permalink

Hartford, CT. Same if not worse than Springfield MA. I know it well. Detroit, MI. are running neck in neck in the biggest shit holes. Every city is in a death spiral.