|Source: Kazuhiko Kawahara at GCClark.net/|
"MOODY'S PLACES Aaa RATINGS OF 177 U.S. PUBLIC FINANCE ISSUERS ON REVIEW FOR POSSIBLE DOWNGRADE DUE TO REVIEW OF U.S. GOVERNMENT'S Aaa RATING
162 LOCAL GOVERNMENTS, 14 HOUSING FINANCE PROGRAMS, AND ONE UNIVERSITY WITH COMBINED $69 BILLION OF DEBT AFFECTED
New York, July 28, 2011 -- Moody's Investors Service has placed under review for possible downgrade the Aaa ratings of 177 public finance credits, affecting a combined $69 billion of outstanding debt. The credits include 162 local governments in 31 states, 14 housing finance programs and one university. A complete list of affected securities and additional analysis is available at www.moodys.com/USRatingActions.
These actions relate to Moody's July 13 decision to place the Aaa government bond rating of the United States under review for downgrade, and reflect the rating agency's assessment that some Aaa public finance ratings would likely be indirectly affected by potential credit deterioration of the sovereign.
In the event the U.S. government's Aaa rating is downgraded, Moody's will determine the outcome of each review by evaluating the strength of the sovereign linkages to each affected credit, including direct and indirect reliance on federal spending, sensitivity to deteriorating macroeconomic conditions and vulnerability to disruptions in the financial markets. Moody's will also consider positive credit attributes of each issuer such as financial position, operating flexibility and management responsiveness.
In a previous action on July 19, Moody's placed the ratings of five Aaa U.S. state governments under review for possible downgrade, affecting approximately $24 billion of general obligation and related debt. Those states are Maryland, New Mexico, South Carolina and Tennessee and the Commonwealth of Virginia.
Some 400 other Aaa-rated public finance credits have not been placed on review for possible downgrade. At this time, Moody's considers their ratings to be resilient to a one-notch downgrade of the U.S. government's bond rating. Should the sovereign rating be downgraded by more than one notch, Moody's would likely assess whether these remaining Aaa ratings should also be placed on review for downgrade.
The review for possible downgrade affects 162 Aaa-rated local governments and $63 billion of debt. Factors weighing on specific credits include high federal employment and exposure to capital markets disruptions.
The 162 local governments include 66 cities, 53 counties, 29 school districts and 14 special tax districts. The local governments are located in 31 states, with the heaviest concentrations in Virginia (15 credits) and Massachusetts (14 credits).
"The ratings of these local governments, particularly those with a high economic dependence on federal activity, would be vulnerable to a downgrade of the U.S. government" said Moody's Senior Vice President Matt Jones, a team leader covering local government ratings. In addition to the risk of federal job reductions, Moody's review following a U.S. government downgrade would focus on a local government's reliance on capital markets, its dependence on federal revenues, its sensitivity to macroeconomic cycles, and its available financial resources to offset these risks." (Continue Reading)