HARTFORD, CT — Standard and Poor’s downgraded Hartford’s bonds Tuesday to junk status.
That means there is little confidence from at least one Wall Street credit rating agency that Connecticut’s capital city will pay off its debts.
“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,” S&P Global Ratings credit analyst Victor Medeiros said.
The news comes just five days after the city announced it had hired an international law firm to help it restructure its debt, which contributed to the downgrade.
Medeiros pointed out that city officials mentioned they would initiate discussions with bondholders for concessions to implement a debt restructuring if it didn’t receive the necessary support in the state budget. The city is looking for at least an additional $40 million from the state to avoid bankruptcy.
“Today’s downgrade should send a clear message to our legislature, to labor, and to our bondholders that this is the time to come together to support a true, far-sighted restructuring,” Hartford Mayor Luke Bronin said Tuesday.
Wall Street will be keeping a close eye on what happens with the state budget. Standard and Poor’s said it essentially reserved the right to downgrade Hartford again if the city doesn’t receive the support it needs from the state in a timely manner.
The General Assembly failed to send Gov. Dannel P. Malloy a budget before the end of the fiscal year and there’s no indication the state will resolve the budget impasse anytime soon even though House Speaker Joe Aresimowicz opined Tuesday that the state will have a budget before the end of July.
“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,” Medeiros wrote.
Standard and Poor’s said it would keep a close eye on what happens with the state budget.
“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,” Medeiros said. “Alternatively, if timely budget adoption translates into stabilized liquidity, and provides long-term structural support, we could remove the ratings from CreditWatch.”