New Jersey’s deal with Atlantic City’s Borgata casino to settle the casino’s back municipal tax refund has improved the city’s overall credit rating, but only a little.
S&P Global Ratings has upgraded Atlantic City’s credit rating from “CC” to “CCC.” While that’s still junk status, it’s the first rise in the city’s rating after a long series of declines.
Moody’s investors Services has also praised the deal with Borgata, but both agencies warned that the city could still default on its loans and face bankruptcy.
Timothy Little, an analyst for S&P, said the upgrade reflects the agency’s opinion that “the near-term likelihood” of Atlantic City defaulting on its debt has “diminished” because of two developments, according to NJ.com.
One is the state’s takeover of the city’s finances in November. The other is a state-brokered deal where Borgata accepted $72 million of the $165 million it was owed by the city in past tax assessment appeals.
That deal is the most notable step the state has taken—and perhaps the only step—since taking over the city’s finances.
Still, the upgrade along with the announcement that Hard Rock International has agreed to buy the closed Trump Taj Mahal casino and re-open it as a Hard Rock property in 2018 does have residents and officials feeling like the city’s fortunes are turning around.
Governor Chris Christie pointed to the credit upgrade “just months after we stepped in to stabilize the city’s troubled finances” along with the Hard Rock announcement.
“These are early signs our efforts are working, that we will successfully revitalize Atlantic City and restore the luster of this jewel on the Jersey Shore,” Brian Murray, a spokesman for Christie’s office, said in a press statement.
Little of S&P however noted that the city’s credit rating remains in junk-bond territory and its recovery remains “tenuous.”
The city has debt service payments of $675,000 due April 1, $1.6 million May 1, $1.5 million June 1, and $3.5 million Aug. 1. S&P said it expects the city to make those payments “on time and in full” but added the “most sizable payments” are due toward the end of the year—including a $6.4 million bill on Nov. 1, NJ.com reported.
Little said the city “is not likely to have the capacity to meet its financial commitment” and that S&P believes there is “at least a one-in-two likelihood” of the city defaulting in the next year.
“Despite the state’s increased intervention, bankruptcy remains an option for the city and, in our opinion, a consideration if timely and adequate gains are not made to improve the city’s structural imbalance,” Little said.
