Moody’s: Takeover prevents Atlantic City default through ’17
ATLANTIC CITY -- A Wall Street ratings firm says New Jersey's takeover of Atlantic City's assets and major decision-making power should prevent the struggling resort from defaulting on its debt at least through the end of next year.
In a note issued Monday, Moody's Investors Service said the takeover should be enough to head off any default on the resort's $500 million in debt through 2017.
New Jersey seized control of Atlantic City earlier the month after rejecting the city's proposed turnaround plan. Former U.S. senator and state attorney general Jeff Chiesa assumed broad powers under the takeover, including the right to overturn decisions of the city council, override or even abolish city agencies and seize and sell assets, including the city's much-coveted water utility.
He also can hire or fire workers, break union contracts, and restructure the city's debt.
While New Jersey has not explicitly guaranteed Atlantic City's debt, Moody's noted that the state Division of Local Government Services "has indicated a willingness to go to the state treasury for assistance if necessary to pay debt service. With its severe liquidity issues, the city's ability to pay its debt service has come into question on a monthly basis."
The agency also noted the state explicitly ruled out a bankruptcy filing for Atlantic City and rates the takeover as "a crucial step."
The state implemented a 2016 budget for the city on Nov. 9 that increases property taxes by $9.4 million, while reducing state aid by $10.8 million.
Atlantic City has been struggling as its casino industry shrinks. Five of its 12 casinos have gone out of business since 2014, and casino revenue has plunged from $5.2 billion in 2006 to $2.56 billion last year.
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