MOODY'S LOWERS RATING ON STATE OF RHODE ISLAND GENERAL OBLIGATION BONDS FROM 'Aa' to 'A1'
MOODY'S LOWERS RATING ON STATE OF RHODE ISLAND GENERAL OBLIGATION BONDS FROM 'Aa' to 'A1' NEW YORK, May 4 /PRNewswire/ -- Moody's Investor Service today lowered from "Aa" to "A1" the rating assigned to the state of Rhode Island general obligation bonds. Despite constructive management response to recent financial pressures arising from the economic downturn, Rhode Island's credit position has weakened as a result of substantial increases in debt and long-term economic vulnerability. The "A1" rating reflects the effective management of financial operations under economic strain, where prompt and responsive actions have prevented the need for deficit financing, preserved cash margins, and produced generally balanced financial operations. The economic recession has been deep and long in Rhode Island, and despite preliminary signs of a national economic recovery, the state's economy is expected to remain weak throughout the decade to contraction in manufacturing and defense-related sectors. Rising debt levels in part reflect bonding undertaken to resolve the banking crisis, a legacy of the state's failed bank regulatory system. Once the banking crisis unfolded, the state had no choice but to launch a strategy to return liquidity to an already stressed economy. However, the price of the solution will be a large debt load. The magnitude of borrowing called for under newly refined plans to resolve the banking crisis now far exceeds original expectations, and adds notably to an already high accumulated debt level. While policies have recently been developed by the current administration to control debt issuance to levels more within the state's capacity, consistent application of these policies for many years will be required to moderate the claim debt service makes on the state's resources, and this may be difficult to sustain in light of continuing infrastructure demands. The state of Rhode Island plans three major financings over the next two months. These include a general obligation refunding planned for mid-May, a financing of the Rhode Island Convention Center Authority shortly thereafter, and a Rhode Island Depositors Economic Protection Corporation (DEPCO) issue in the first week of June. The rating revision from "Aa" to "A1" also applies to the state- guaranteed debt of the Blackstone Valley Sewerage District and the Rhode Island Turnpike and Bridge Authority. At this time Moody's has reviewed and confirmed the "A" rating assigned to the uninsured lease rental debt of the Rhode Island Public Building Authority. Unaffected by this rating action are the state's insured and letter of credit-supported ratings. Net tax supported debt outstanding: $1,236,601,000 -0- 5/4/92 /CONTACT: George Leung, 212-553-0342, or Renee Boicourt, 212-553-7162, both of Moody's/ CO: ST: Rhode Island IN: SU: RTG
PS-SM -- NY106 -- 6263 05/04/92 17:37 EDT
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|Date:||May 4, 1992|
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