July 26 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
"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.