Atlantic City, N.J., will make Aug. 1 debt payment - mayor

(Reuters) - Atlantic City, New Jersey’s gambling hub, will make its $3.4 million debt service payment due Aug. 1, Mayor Don Guardian said on Thursday amid concerns over whether the cash-strapped city would default.

In legislation signed by Governor Chris Christie in May, the state committed to helping the city by providing a bridge loan while local officials devise a financial recovery plan by November, or else face state takeover.

But that loan still has not been finalized, leading to fears that the city would not be able to make its August payment on general obligation bonds issued in 2011 and 2012.

Moody’s Investors Service warned on Wednesday that without the loan, “a default would likely set off a series of missed debt payments and revive the prospect of the city filing for bankruptcy, or pursuing debt restructuring outside bankruptcy.”

The city and state agreed on a $74 million loan. But terms have not been announced and there has been no final agreement, Moody’s said.

Even so, the city will make its payroll on Friday “and plans to also make the August 1st debt payment” on Monday, Guardian said in a statement.

“We anticipate that the bridge loan agreement with the state will be completed in short order and the funding required by the act will be put in place to cover operational expenses of the city,” the statement said.

The city owes bondholders an additional $18.6 million for the rest of this year, with the biggest payment of $9.4 million due in November, according to Moody’s.