Moody's downgrades Sacramento County ratings

NEW YORK Feb 17 (Reuters) - Moody's Investors Service on Wednesday downgraded Sacramento County ratings, citing concerns about its ability to eliminate current fiscal year and future budget deficits.

The credit rating agency said it was downgrading the California county's issuer rating by one notch to A3 from A2, impacting about $1.38 billion of debt. The A3 rating is four notches above junk status.

Sacramento's debt portfolio incorporates a number of risks, Moody's said, including rollover risk on a $134 million letter of credit which matures next month.

Moody's also said the outlook on the county's ratings remains negative, meaning it could downgrade it again within tow years.

"Given the county's lack of financial flexibility ... the potential remains that events such as additional state cuts would further diminish the county's already weak financial position and put downward pressure on the rating," Moody's said.

The downgrade was the second in as many days for Sacramento County. Standard & Poor's Ratings Services lowered its rating on the county on Tuesday to A from A+, and revised its outlook to negative from stable. S&P's A rating is five notches above junk status. (Reporting by Chris Reese; Editing by Dan Grebler)