Moody's warns could cut 5 states tied to U.S. credit

CHICAGO Tue Jul 19, 2011 1:15pm EDT

CHICAGO (Reuters) - Moody's Investors Service on Tuesday added five triple-A-rated states to its list of candidates for possible ratings downgrades along with the United States.

Maryland, New Mexico, South Carolina, Tennessee and Virginia were put on review due to their high federal employment levels or Medicaid exposure, Moody's said, adding that the five would likely lose their top ratings should the United States' rating be cut to Aa1 or lower.

The action followed Moody's placement on July 13 of the United States' Aaa rating on review for a downgrade. At that time, Moody's said it would be reviewing all 15 Aaa-rated states along with a slew of top-rated, cities, counties, school districts and universities to determine their vulnerability to deterioration in the United States' credit.

The remaining triple-A-rated states -- Alaska, Delaware, Georgia, Indiana, Iowa, Missouri, North Carolina, Texas, Utah and Vermont -- were not placed on review for a possible downgrade because they are "resilient to a one-notch downgrade of the sovereign bond rating at this time," Moody's said.

(Reporting by Karen Pierog, Editing by Chizu Nomiyama and Leslie Adler)

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