NEW YORK (Reuters) - The mayor of Hartford on Monday told bond investors that Connecticut’s cash-strapped capital city has no room left to tax or cut its way out of its fiscal crisis, a bond holder said.
Mayor Luke Bronin reiterated that Hartford needs a substantial amount of state funding to avoid a Chapter 9 bankruptcy filing, according to bondholder Belle Haven Investments.
Bronin laid out the city’s dire circumstances and its potential case for insolvency in a call with investors, said Matthew Dalton, CEO of Belle Haven, which holds $30 million of insured Hartford general obligation debt. He said the mayor revealed no new critical information on the call, which lasted roughly 15 minutes.
“I’m sure Hartford is using the Detroit timeline as template for success,” Dalton said, referring to the Motor City’s initial offer for pennies on the dollar, before it sought what became the biggest ever U.S. municipal bankruptcy.
The pre-planned investor call came hours after bond insurer Assured Guaranty Ltd AGO.N publicly offered to support a refinancing of Hartford's debt under a new state law.
Such a move would lower debt service payments over the next 15 years and push repayments further into the future, providing near-term breathing room for the city of 123,200 people.
“We believe a consensual agreement among stakeholders offers the city a better path forward than bankruptcy,” Assured said in a statement.
“I appreciate Assured’s willingness to have constructive discussions,” Bronin said on the call, according to a statement his office released afterwards. “We are interested in long-term solutions that leave the city with a path to sustained solvency and strength.”
Earlier this month, Bronin warned that Hartford will likely seek to file for bankruptcy if the state does not have a budget in place in 60 days.
The junk-rated city is waiting to see how much aid it might get from the state, which itself is struggling with high taxes, falling revenue, $73 billion of pension and debt obligations and people and businesses leaving.
Connecticut faces a $3.5 billion deficit over the next two years and its budget is nearly three months overdue.
Assured has the most exposure to Hartford’s debt. It backs $311 million of the city’s bonds, while Build America Mutual Assurance Company (BAM) wraps $103 million.
BAM said it had also been in talks with city and state officials.
“Utilizing BAM’s guaranty as part of a debt-restructuring solution will drive substantial savings,” Chief Credit Officer Suzanne Finnegan said in a statement.
About another $9 million is insured by MBIA Insurance Corp subsidiary National Public Finance Guarantee.
Additional reporting by Bhanu Pratap and Parikshit Mishra in Bengaluru; Editing by Bernard Orr and David Gregorio
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