MOODY'S LOWERS NEW JERSEY BOND RATING FROM 'Aaa' TO 'Aa1'
MOODY'S LOWERS NEW JERSEY BOND RATING FROM 'Aaa' TO 'Aa1' NEW YORK, Aug. 24 /PRNewswire/ -- Moody's Investors Service today lowered from Aaa to Aa1 the rating assigned to the State of New Jersey's general obligation bonds. A developing pattern of reliance on non- recurring measures to achieve budgetary balance, four years of financial operations marked by revenue shortfalls and operating deficits, and the likelihood that serious financial pressures will persist all detract from bondholder security. In the four years which began with fiscal 1989, first economic slowdown and then recession have upset the state's budget plans, weakening revenues, adding to spending pressures and forcing the state to draw down its once-substantial accumulated surplus. Fiscal 1993 revenues and spending assumptions appear vulnerable to the same recessionary forces as those which undermined earlier years' results. Reliance on non-recurring measures in the budgets enacted for fiscal 1992 and again for 1993, along with expected growth in spending, will produce a sizable budget gap requiring resolution in fiscal 1994. This will come at a time when pending elections could make it even more difficult for the state to address, on a substantive basis, the significant budgetary issues which it faces. Legal protections afforded New Jersey bondholders remain strong, with the state's general obligations also secured by specific revenue pledges. New Jersey's broad-based economy, high wealth levels, and moderate debt ratios continue to form the basis of its credit strength. Moody's also assigned ratings of A1 to offerings by the State of New Jersey of $61,005,000 certificates of participation ($34,575,000 series A lottery network certificates and $26,430,000 series B centrex certificates) dated Aug. 15, 1992, which are expected to be sold later this week. Certificate proceeds will be used to prepay certain service costs of the state's lottery system and its centrex telephone system. For each series of certificates, security rests with the credit standing of the State of New Jersey, which has agreed to make basic payments, under respective agreements, equal to debt service requirements as they come due. In each case the state's payment obligation is absolute and unconditional, but is subject to annual appropriation by the legislature. The limited nature of the state's payment obligation and the use of certificate proceeds for prepayment of service costs of essential functions both contribute to the rating assigned. Finally, Moody's also confirmed the Aa rating assigned to state contract bonds of the New Jersey Sports and Exposition Authority, which is expected to sell $14.3 million of state contract bonds, 1992 series B, later this week. Security for these bonds rests with payments by the state from General Fund revenues, subject to annual appropriation; no revenues to be generated by the Authority are pledged. The state's willingness to assume substantial amounts of Sports and Exposition Authority debt, in light of an economically driven slowdown in Authority revenues, demonstrates its strong commitment to the Authority in recognition of the state-wide benefits derived from its activities. General obligation bonds outstanding: $3,316,391,000 Net tax-supported debt, including current offering: $5,028,030,000 -0- 8/24/92 /CONTACT: George Leung, 212-553-0342, or Steven Hochman, 212-553-0338, both of Moody's/ CO: ST: New Jersey IN: SU: RTG
PS-KW -- NY078 -- 2754 08/24/92 17:18 EDT
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|Date:||Aug 24, 1992|
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