Chicago’s Junk Rating From Moody’s Puzzles Investors http://www.bloomberg.com/news/articles/2015-05-14/chicago-s-junk-rating-from-moody-s-puzzles-market-with-s-p-at-a-
No U.S. city has provoked a bigger disagreement between the two largest bond-rating companies than Chicago. Investors aren’t sure whom to believe.
Moody’s Investors Service has cut the third-largest city’s rating seven levels since July 2013, most recently knocking it this week to Ba1, one step below investment grade. Standard & Poor’s has rated it A+, the fifth-highest rank, for more than four years.
The six-level split is more than for any other city and unheard of for an issuer with $8.1 billion of general-obligation debt like Chicago, said Matt Fabian, a partner at Municipal Market Analytics. As the city plans $383 million of refinancing deals next week, trading in the $3.6 trillion market signals bond buyers are moving closer to Moody’s view, while stopping short of assessing it like junk.
Chicago issuers have started to shun Moody’s in bond offerings. Both the Chicago Park District and Chicago Transit Authority didn’t use a Moody’s rating in June 2014 deals, data compiled by Bloomberg show. S&P rates the two issuers AA+ and AA, respectively, the second- and third-best grades. The Chicago Board of Education excluded Moody’s when it sold $300 million of debt last month.
The only issuers with such divergent ratings are also deemed junk by Moody’s. They include Clarendon Hospital District in South Carolina, school warrant obligations from Jefferson County, Alabama, and Yeshiva University in New York.
“Puerto Rico was a much worse credit at investment grade than Chicago is at non-investment grade,” Fabian said. “Maybe it’s not appropriate that Chicago be rated by Moody’s anymore.”
After Moody's bombshell, what will other ratings agencies say? http://www.chicagobusiness.com/article/20150514/NEWS01/150519881/after-moodys-bombshell-what-will-other-ratings-agencies-say
When Moody's Investors Service downgraded Chicago debt to junk status, it did more than tick off City Hall with its timing. It ramped up pressure on other rating agencies, giving them something else to ponder in deciding how soon to act.
Moody's announcement on May 12 preceded—and threatened to short-circuit—city efforts to refinance $900 million in variable-rate debt and borrow $200 million to pay off interest-rate swaps and avoid termination fees and other financial penalties associated with a lower credit rating.
"The fact is, the risk has escalated because of Moody's actions," said Richard Ciccarone, the Chicago-based CEO of Merritt Research Services. "They've become part of the problem."
After Moody's acted on May 12, Fitch Ratings, which rates Chicago debt A-minus, said it was "in contact with city management and will assess the rating impact of the recent downgrade."
Mike Belsky, a former group manager in public finance for Fitch in Chicago, contends that Moody's acted prematurely, underestimating Chicago's "booming economy" and City Hall measures to work out of its pension mess. He adds, "S&P puts more weight on underlying economics than Moody's."
Bill Morris, a retired investment banker and former state senator [said] "In fact, not hiring them may have precipitated this."
Others argue that Moody's and its ilk are still compensating for overly rosy ratings that preceded the mortgage-market meltdown.
"All the agencies are trying to re-establish their street cred," says Bill Brandt, a former chairman of the Illinois Finance Authority. "When the pendulum swings, it tends to swing to the extreme."
Chicago's credit rating takes another hit, this one less severe http://my.chicagotribune.com/#section/-1/article/p2p-83544799/
A second major debt rating agency has lowered Chicago's creditworthiness by two notches, but kept it three steps above the junk-level status assigned earlier this week by Moody's Investments Service.
In lowering Chicago's debt rating Thursday, Standard & Poor's noted the Moody's action by saying the junk status rating affected "the city's ability to implement timely solutions to its structural budgetary problems."
"The fact is, the risk has escalated because of Moody's actions," said Richard Ciccarone, the Chicago-based CEO of Merritt Research Services. "They've become part of the problem."
Whew! Thank you for this clarification! There I was thinking that Chicago's woes might somehow be connected to the fact that it has had 85 years of uninterrupted Democrat rule, but it's now looking like everything might be Moody's fault!
Less excitable readers will notice that Standard & Poor's agrees with the quoted financial expert and not with the previous poster. S&P specifically cites Moody's rating as a new factor damaging Chicago's "ability to implement timely solutions to its structural budgetary problems."
Also mentioned in those articles: Moody's has repeatedly and consistently given Chicago a dramatically worse rating than either S&P or Fitch. It has gotten to the point where Chicago has stopped commissioning Moody's to assess some of its debt and bond offerings, because Moody's ratings are so out of line with the norm ("unheard of," says Bloomberg News) and harmful to the city.
Subsequently (one hesitates to say "in response") Moody's announced an even larger and sudden drop in Chicago's rating.
Flip the partisan politics of the situation, and it wouldn't be hard to foresee the previous poster and the type of press coverage he prefers denouncing Moody's role in "Bondghazi."
Whew! Thank you for this clarification! There I was thinking that Chicago's woes might somehow be connected to the fact that it has had 85 years of uninterrupted Democrat rule, but it's now looking like everything might be Moody's fault!
Indeed, the exclamation points are key to providing "the comedy." Or should that be "the comedy!" And the "thank you" that's not really a "thank you"-- oh man, that is simply hilarious stuff! You must be the head writer for "The Greg Gutfeld Show."
How lame is Moody's that it took them 83 years of uninterrupted Democratic rule to spot Chicago's danger signs?
6 comments:
Chicago’s Junk Rating From Moody’s Puzzles Investors
http://www.bloomberg.com/news/articles/2015-05-14/chicago-s-junk-rating-from-moody-s-puzzles-market-with-s-p-at-a-
No U.S. city has provoked a bigger disagreement between the two largest bond-rating companies than Chicago. Investors aren’t sure whom to believe.
Moody’s Investors Service has cut the third-largest city’s rating seven levels since July 2013, most recently knocking it this week to Ba1, one step below investment grade. Standard & Poor’s has rated it A+, the fifth-highest rank, for more than four years.
The six-level split is more than for any other city and unheard of for an issuer with $8.1 billion of general-obligation debt like Chicago, said Matt Fabian, a partner at Municipal Market Analytics. As the city plans $383 million of refinancing deals next week, trading in the $3.6 trillion market signals bond buyers are moving closer to Moody’s view, while stopping short of assessing it like junk.
Chicago issuers have started to shun Moody’s in bond offerings. Both the Chicago Park District and Chicago Transit Authority didn’t use a Moody’s rating in June 2014 deals, data compiled by Bloomberg show. S&P rates the two issuers AA+ and AA, respectively, the second- and third-best grades. The Chicago Board of Education excluded Moody’s when it sold $300 million of debt last month.
The only issuers with such divergent ratings are also deemed junk by Moody’s. They include Clarendon Hospital District in South Carolina, school warrant obligations from Jefferson County, Alabama, and Yeshiva University in New York.
“Puerto Rico was a much worse credit at investment grade than Chicago is at non-investment grade,” Fabian said. “Maybe it’s not appropriate that Chicago be rated by Moody’s anymore.”
After Moody's bombshell, what will other ratings agencies say?
http://www.chicagobusiness.com/article/20150514/NEWS01/150519881/after-moodys-bombshell-what-will-other-ratings-agencies-say
When Moody's Investors Service downgraded Chicago debt to junk status, it did more than tick off City Hall with its timing. It ramped up pressure on other rating agencies, giving them something else to ponder in deciding how soon to act.
Moody's announcement on May 12 preceded—and threatened to short-circuit—city efforts to refinance $900 million in variable-rate debt and borrow $200 million to pay off interest-rate swaps and avoid termination fees and other financial penalties associated with a lower credit rating.
"The fact is, the risk has escalated because of Moody's actions," said Richard Ciccarone, the Chicago-based CEO of Merritt Research Services. "They've become part of the problem."
After Moody's acted on May 12, Fitch Ratings, which rates Chicago debt A-minus, said it was "in contact with city management and will assess the rating impact of the recent downgrade."
Mike Belsky, a former group manager in public finance for Fitch in Chicago, contends that Moody's acted prematurely, underestimating Chicago's "booming economy" and City Hall measures to work out of its pension mess. He adds, "S&P puts more weight on underlying economics than Moody's."
Bill Morris, a retired investment banker and former state senator [said] "In fact, not hiring them may have precipitated this."
Others argue that Moody's and its ilk are still compensating for overly rosy ratings that preceded the mortgage-market meltdown.
"All the agencies are trying to re-establish their street cred," says Bill Brandt, a former chairman of the Illinois Finance Authority. "When the pendulum swings, it tends to swing to the extreme."
Chicago's credit rating takes another hit, this one less severe
http://my.chicagotribune.com/#section/-1/article/p2p-83544799/
A second major debt rating agency has lowered Chicago's creditworthiness by two notches, but kept it three steps above the junk-level status assigned earlier this week by Moody's Investments Service.
In lowering Chicago's debt rating Thursday, Standard & Poor's noted the Moody's action by saying the junk status rating affected "the city's ability to implement timely solutions to its structural budgetary problems."
"The fact is, the risk has escalated because of Moody's actions," said Richard Ciccarone, the Chicago-based CEO of Merritt Research Services. "They've become part of the problem."
Whew! Thank you for this clarification! There I was thinking that Chicago's woes might somehow be connected to the fact that it has had 85 years of uninterrupted Democrat rule, but it's now looking like everything might be Moody's fault!
Our ever-temperate poster interprets:
"escalated" + "part of" = "everything might be Moody's fault."
Less excitable readers will notice that Standard & Poor's agrees with the quoted financial expert and not with the previous poster. S&P specifically cites Moody's rating as a new factor damaging Chicago's "ability to implement timely solutions to its structural budgetary problems."
Also mentioned in those articles: Moody's has repeatedly and consistently given Chicago a dramatically worse rating than either S&P or Fitch. It has gotten to the point where Chicago has stopped commissioning Moody's to assess some of its debt and bond offerings, because Moody's ratings are so out of line with the norm ("unheard of," says Bloomberg News) and harmful to the city.
Subsequently (one hesitates to say "in response") Moody's announced an even larger and sudden drop in Chicago's rating.
Flip the partisan politics of the situation, and it wouldn't be hard to foresee the previous poster and the type of press coverage he prefers denouncing Moody's role in "Bondghazi."
Still compulsively researching and refuting jokes, I see.
Keep up the good work.
Whew! Thank you for this clarification! There I was thinking that Chicago's woes might somehow be connected to the fact that it has had 85 years of uninterrupted Democrat rule, but it's now looking like everything might be Moody's fault!
Indeed, the exclamation points are key to providing "the comedy." Or should that be "the comedy!" And the "thank you" that's not really a "thank you"-- oh man, that is simply hilarious stuff! You must be the head writer for "The Greg Gutfeld Show."
How lame is Moody's that it took them 83 years of uninterrupted Democratic rule to spot Chicago's danger signs?
Post a Comment