Two months after S&P downgraded the state capital of Connecticut, Hartford, to junk, when it cuts its bond rating from BB+ to BB- citing growing liquidity pressures and weaker market access, the city which has been rumored is preparing to file for bankruptcy protection and which has seen an exodus of corporations and businesses in recent months, just got more bad news when S&P downgraded it by a whopping 4 notches deeper into junk territory, from BB- to CC, stating that “a default, a distressed exchange, or redemption appears to be a virtual certainty.”
“The downgrade to ‘CC’ reflects our opinion that a default, a distressed exchange, or redemption appears to be a virtual certainty,” said S&P Global Ratings credit analyst Victor Medeiros.
The rating agency also warned that it could take additional action to lower the rating to ‘Default’ if the city executes a bond restructuring or distressed exchange, or files for bankruptcy.
In our view, the potential for a bond restructuring or distressed exchange offering has solidified with the news that both bond insurers are open to supporting such a measure in an effort to head off a bankruptcy filing. Under our criteria, we would consider any distressed offer where the investor receives less value than the promise of the original securities to be tantamount to a default.
Full S&P note below:
Hartford, CT GO Debt Rating Lowered Four Notches To ‘CC’ On Likely Default
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