S&P: Petersburg, VA 'BBB' GO Debt Rating Placed On CreditWatch Negative On Liquidity Concerns
"The CreditWatch with negative implications reflects a recent event that the city has not secured short-term financing in fiscal 2017, as it annually does," said S&P Global Ratings credit analyst Timothy Little, "presenting considerable liquidity challenges in the coming months." As identified by the state's report on technical assistance to council, the city will have extreme difficulty paying essential bills (including payroll) in the latter part of 2016, perhaps as early as mid-August.
In addition, due to the city's participation in other governmental agreements to provide for debt service payment the 'BBB' underlying rating (SPUR) on Stafford County & Staunton Industrial Development Authority's Municipal League-Virginia Association of Counties Finance Recovery Act Bond Pool II series 2010D taxable recovery zone economic development bonds (RZEDBs), series 2010E taxable Build America bonds (BABs), and series 2010F tax-exempt bonds was placed on CreditWatch with negative implications.
The city's full faith and credit pledge secures its GO bonds to levy, without limitation as to rate or an amount, an ad valorem tax on all taxable property within its jurisdiction to pay principal and interest on its GO bonds.
"The CreditWatch designation indicates there is at least a one-in-two likelihood of a rating change within the next 90 days," added Mr. Little. During this time, we expect to have additional information regarding the city's ability to obtain short-term financing and its plans for addressing its thin liquidity and imbalances.