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July 23 Moody's Investors Service cut its rating on Atlantic City two notches to junk at Ba1 on Wednesday because of the city's struggling gaming industry and impending casino closures.
Increased competition from casinos in neighboring states has led to declining casino revenues, and the city has had to pay expensive property tax appeals to casinos whose properties lost value.
The city also has a narrow financial cushion and "very weak" residential socioeconomics, as well as a growing debt burden, Moody's said.
Moody's outlook on the New Jersey city remains negative because the credit rating agency expects regional gaming competition to further weaken the city's prospects. The city also plans to issue new debt in order to pay for ongoing casino tax settlements, another factor weighing down the rating. (bit.ly/UtwAv3)
The downgrade affects $245 million of Atlantic City's outstanding general obligation parity debt.
The Revel casino and resort, which was a centerpiece of New Jersey Governor Chris Christie's effort to bring Las Vegas-quality gambling to a slumping Atlantic when it opened in April 2012, last month filed for bankruptcy for the second time in its short history.
In addition, Caesars Entertainment Corp's Showboat Casino is slated to close at the end of the summer.
Altogether, Atlantic City gaming revenue has fallen to $2.8 billion, a little more than half its 2006 peak of $5.2 billion. (Reporting by Abinaya Vijayaraghavan in Bangalore and Hilary Russ in New York; Additional reporting by Daniel Kelley; Editing by Bernard Orr)