Wall Street seemingly took a breather this week, as investors focused on looming concerns over the Fed tapering its massive bond buying program. As always, municipal bond investors should keep a close eye on any news concerning their respective municipal investments, as well as the latest ratings reports. Here, we highlight Moody's recent upgrades and downgrades seen over the week:
Upgrades
- Patchogue-Medford Union Free School District, NY: Moody's upgraded this school district's general obligation bonds from A2 to A1. The rating firm, however, removed its positive outlook. The upgrade reflects the district's improved financial position and track record of conservative budgeting.
Downgrades
- Pontiac City School District, MI: Moody's downgraded the general obligation unlimited tax issuer rating of this school district from B3 to Caa1. The firm also downgraded the district's general obligation limited tax debt from Caa1 to Caa2. A negative outlook was also assigned. The downgrades represent expected loss, encompassing both default probability and bondholders' likely post-default recovery.
- North College Hill City School District, OH: This school district's general obligation rating was downgraded from A2 to A3. The negative outlook, however, was removed. The rating reflects the district's small, depreciating tax base located in the metro Cincinnati region, and narrow General Fund cash reserves.
- Village of Oak Lawn, IL: Moody's downgraded this village's general obligation bonds from Aa3 to A1. The downgrade reflects the village's limited liquidity and narrow but improving General Fund balance that has been restored from a deficit position in fiscal 2010, primarily through one-time revenue sources.
- Reading School District, PA: This school district's general obligation rating was downgraded from A3 to Baa2 (the enhanced rating was also downgraded from A1 to A3). The downgrade reflects the district's narrowed financial position after a $15 million accounting error correction in fiscal 2012.
- Mount Clemens Community School District, MI: Moody's downgraded the general obligation unlimited tax rating of this school district from Baa3 to Ba3. The outlook remains negative. The downgrade reflects the district's substantial General Fund deficit position, which has not been rectified in a timely manner, primarily due to annual revenue pressures.
- Redwoods Community College District, CA: This school district's general obligation bonds were downgraded from Aa2 to A1. The outlook was assigned as negative. The rating reflects the district's sizeable tax base with below average wealth levels, modest debt burden, and below average financial position.
- Sylvania City School District, OH: Moody's downgraded this school district's long-term rating from Aa2 to Aa3. The district's rating is based on its below average cash reserves, which stabilized in fiscal year 2012, but are likely to remain pressured due to recent valuation declines and dependence on voter support for future revenue enhancements.
- South Lake School District, MI: Moody's downgraded this school district's underlying general obligation unlimited tax rating from A1 to Baa1. The downgrade reflects a trend of imbalanced operations within the district's General Fund that is estimated to have resulted in a very narrow financial position at the close of fiscal 2013.