Thursday, July 12, 2012 – 01:05 p.m.
Standard and Poors Ratings Services cut its rating on city of San Bernardino debt to “junk” status on Wednesday.
S&P lowered its rating on San Bernardino, Calif.’s series 1997A lease revenue refunding bonds to ‘CC’ from ‘BBB+’. In addition, Standard & Poor’s placed the rating on CreditWatch with negative implications.
On Thursday, S&P also said that its ‘A-‘ long-term rating on San Bernardino Joint Powers Financing Authority, Calif.’s 2006 housing-set aside tax allocation bonds and the ‘BBB’ long-term rating on the authority’s 2010A and 2010B non-housing tax allocation bonds remain on CreditWatch with negative implications following the city’s vote to file for bankruptcy.
S&P said in it’s two reports that “On July 10, 2012, the city council voted to file for protection under Chapter 9 of the U.S. bankruptcy code. We understand that California Assembly Bill 506 requires the city to participate in a neutral evaluation process with its creditors or declare a fiscal emergency before filing for bankruptcy protection. Although, in our view, special district revenues pledged to debt service on the bonds may qualify as “special revenues” under the U.S. Bankruptcy Code, the credit implications for the bonds, nevertheless, remain uncertain at this time.”