ATLANTIC CITY, NJ—As the specter of additional casino closings hovers over this resort city, Moody's Investors Service dealt Atlantic City a blow, downgrading its debt two levels to speculative grade at Ba1.
The downgrade announced yesterday impacts the city's $245 million of general obligation debt. In its analysis of Atlantic City, Moody analysts Vito Galluccio and Julie A. Beglin said the downgrade “reflects the city's significantly weakened tax base, revenue-raising ability, and broader economic outlook. These result from ongoing casino revenue declines, expected near-term casino closures, and the impact of sizable casino tax appeals, all of which has stemmed from increased competition from casinos in neighboring states. The rating also factors in the city's still-substantial tax base dominated by a pressured gaming industry (nearly 70% of assessed values), narrow financial cushion, very weak residential socioeconomics and an increasing debt burden.
The analysts also noted that Moody's negative outlook on the city is based on its expectation that regional casino gaming competition will further weaken casino revenues and tax appeals and casino closure will continue to reduce the city's tax base and strain the city's already weakened financial position.
“The outlook also considers the city's above-average debt burden in light of significant new debt issuance plans to fund recently settled tax appeals,” the Moody's analysts stated.
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