UPDATE 1-Moody's public finance downgrades outpace upgrades
July 26 (Reuters) - Leading rating agency Moody's Investors Service downgraded 219 public finance ratings in the second quarter and it expects the high pace to continue through the year, it said in a special report on Friday. Moody's said that downgrades made up 83 percent of the public finance rating changes in the quarter. In the second quarter, the par amount of the debt downgraded more than tripled to $92 billion from $27 billion in the first quarter, largely due to the ratings cut on $32 billion of Illinois general obligation and sales tax bonds. The state's ongoing pension funding battles have raised concerns about its credit quality in the municipal bond market. The agency said that debt issued by Detroit and the city's water and sewer agency accounted for nearly half of the $19.9 billion par amount of local government downgrades. "We expect the high pace of downgrades to continue in 2013 for most sectors," said Moody's Assistant Vice President Eileen Hawes in a statement. "Although the U.S. economy overall continues to indicate a trend of slow recovery, there are regional and intra-regional differences in the pace of recovery, and revenue and budgetary challenges remain for many entities." The infrastructure sector, namely toll roads, airports and electric utilities, experienced several large downgrades over the quarter. Moody's said it downgraded Long Island Power Authority's $7 billion debt because of its weak liquidity, including its reliance on "an unpredictable reimbursement" from the federal government related to Superstorm Sandy at the end of last year. "The largest downgrades were in different sectors across public finance, demonstrating that widespread negative pressures continue to make it difficult for credit conditions to stabilize," said Hawes.
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