Two credit agencies have revised Connecticut’s rating outlook down to “negative” ahead of a $550 million bond sale scheduled for next week.
Moody’s Investors Service and Kroll Bond Rating Agency each announced the actions this week. Moody’s assigned an “Aa3” rating to the upcoming bond sale, and affirmed its previous AA3 rating on the state’s existing general obligation debt.
Two other ratings agencies, Fitch Ratings and Standard & Poor’s, affirmed previous respective outlooks of “stable” and “negative.”
Moody’s said the negative outlook reflected “weakening demographics in the state that have led to some current budgetary strain.”
“While we expect the state to solve the budgetary gaps with recurring solutions, we believe that the weakening demographics will continue and place negative pressure on the state’s economy and finances in the next few years, while the very high fixed costs reduce flexibility and present additional challenges,” the company said in a statement.
Meanwhile, Kroll assigned its “AA” rating for next week’s debt sale, and affirmed the same for its long-term Connecticut rating.
State Treasurer Denise Nappier released a statement calling the ratings “bittersweet.”
“While there is the good news that the state’s ratings remain unchanged – which demonstrates continued confidence in our creditworthiness – the Moody’s and Kroll negative outlooks further emphasize the need to fortify the state’s fiscal footing,” Nappier said.
Nappier said the across-the-board budget cuts and reductions in state jobs proposed by Gov. Dannel Malloy this year will likely be viewed positively in the future by ratings agencies.
Connecticut’s ratings have been bolstered over the years by several relative strengths, particularly its high per-capita income.
More information on the bond sale, which will fund state building projects, grant programs, university improvements and other initiatives, can be viewed here
http://www.buyctbonds.com/the_bonds.html
Day Pitney and Finn Dixon & Herling are serving as disclosure counsel for the bond sale. Robinson & Cole and Soeder & Associates are serving as tax counsel. Acacia Financial Group and A.C. Advisory are acting as financial advisors.
