S&P Global Ratings has downgraded Connecticut’s bond rating from ‘A+’ to ‘A,’ citing the state’s onerous debt burden.
The ratings agency noted that the state carries approximately $18.5 billion in general obligation (GO) debt outstanding, and it explained that its criteria for states “adds an extra one-notch downward adjustment” when the debt ratio exceeds certain ratings thresholds. “The downgrades follow an increase in Connecticut’s tax-backed debt ratios,” said S&P Global Ratings credit analyst David Hitchcock.
S&P Global Ratings also assigned its ‘A’ rating and stable outlook to Connecticut’s $300 million 2017 series C variable-rate GO bonds outstanding, which were sold in a direct placement with Barclays Capital Inc. on June 28, 2017. However the agency downgraded the state’s appropriation-secured debt rating from ‘A’ from ‘A-‘ and the state’s moral obligation debt rating from ‘BBB+’ to ‘BBB’, while short-term bond anticipation notes (BAN) were downgraded from ‘SP-1+’ to ‘SP-1’ on series 2017 A BANs.
The outlook on all long-term ratings related to these bonds is stable.
Separately, S&P Global Ratings raised its rating on the City of Hartford, Conn.’s $540.1 million of GO debt multiple notches to ‘A’ from ‘CCC’ and removed the rating from CreditWatch after the state government stepped in to save the capital city from potential bankruptcy by making its debt a general obligation of Connecticut.