Fitch downgrades NY City debt after S&P revises outlook on COVID uncertainty

(Reuters) -Rating agency Fitch late Tuesday downgraded New York City debt to ‘AA-’ from ‘AA’, while maintaining its negative outlook, on concerns of a prolonged impact to the city’s economic growth due to the coronavirus crisis and related containment measures.

FILE PHOTO: The S&P Global logo is displayed on its offices in the financial district in New York City, U.S., December 13, 2018. REUTERS/Brendan McDermid/File Photo

Fitch’s move comes close on the heels of S&P Global Ratings changing its outlook on the city’s debt to “negative” from “stable” due to uncertainties stemming from a recent uptick in the virus transmission rate.

S&P’s revision relates to the city’s general obligation (GO) and associated appropriation-backed bonds, while the Fitch downgrade includes industrial development revenue (IDR) bonds, special revenue bonds and GOs.

It reflects a one-in-three chance S&P could lower its rating during the outlook period, which typically spans two years, the rating agency said.

The coronavirus transmission rate increase could hurt the city’s financial forecast, and could negatively affect global tourism trends and additional federal stimulus funding for state and local governments as well as service reductions at the Metropolitan Transportation Authority, S&P Global Ratings credit analyst Nora Wittstruck said in a statement.

Meanwhile, Fitch analyst Amy Laskey said it expects that the city’s elevated liability burden will increase, but remain consistent with its current assessment.

Coronavirus cases in the United States have crossed the 15 million mark, according to a Reuters tally on Tuesday.

These issues could affect the region’s economic recovery and cause “weakness in property tax values that will not be evident until fiscal 2023,” S&P’s Wittstruck said.

New York state Governor Andrew Cuomo said on Monday that if hospitalization rates keep climbing this week, he would suspend indoor dining at New York City restaurants. The city resumed indoor service in September at 25% of capacity.

On Nov. 18, New York’s Metropolitan Transportation Authority (MTA), which faces nearly $16 billion in projected deficits through 2024 due a sharp drop in ridership on its buses, subways and trains, had to authorize borrowing of up to $2.9 billion from a U.S. Federal Reserve loan program to aid its coronavirus-battered budget.

Reporting By Sinéad Carew, and Derek Francis in Bengaluru; Editing by Jonathan Oatis and Sherry Jacob-Phillips