SAN FRANCISCO Oct 9 Moody's Investors Service said on Tuesday it placed under review for downgrade lease-backed obligation and general obligation ratings of several California cities and downgraded the pension obligation bonds of eight cities and one pooled financing in state.
The moves affect $14.3 billion of debt and come amid concerns among some credit rating analysts about California's economy and the willingness of financially distressed cities in the most populous U.S. state to pay their debts.
"The reviews and downgrades reflect a combination of fundamental economic pressures in the state, the different way in which various revenue sources have been affected and the factors that influence a city's ability and willingness to pay the obligations backed by these revenue sources," Moody's said in a statement.
"Most affect securities that are paid from a city's general funds and do not benefit from a specific pledged revenue source," the rating agency said, noting it identified the securities as part of review launched in August of the credit standing of 95 cities it rates in California.
Moody's said recent bankruptcy filings by a handful of cities in California "demonstrate that the willingness of some cities to continue to cut costs and associated municipal services to pay debt obligations may be eroding."
The rating agency said it is reviewing for downgrade 27 cities' lease-backed obligations backed by general funds.
Additionally, the pension obligation bonds of nine issuers were downgraded. Eight, along with one other city's pension obligation bonds, remain under review for possible further downgrade.
Moody's said it also placed under review for downgrade the general obligation ratings of nine cities, eight rated in the 'Aaa' to 'Aa' range.
At the same time, Moody's placed the general obligation bond ratings of Los Angeles and San Francisco under review for upgrade, reflecting their "significant tax bases that have demonstrated relative resiliency during the economic and property market downturns."