Moody’s Investors Service has agreed to "restore" the Borough of Collingswood’s credit rating to Baa3, an investment grade acceptable to many insurance companies and other low-risk investors, according to Mayor Jim Maley.
Moody’s analyst Josellyn Yousef raised the rating from Ba1 — junk-bond status — to acknowledge "the reduction of risk" after the borough refinanced debt for a troubled condominium project, she wrote in a report to clients. The agency noted that debt repayment eats up about $1 of every $6 the borough spends, a relatively high expense for the town of about 14,000 people.
The rating boost comes eight months after Moody’s slashed the Camden County town’s profile by six notches on concerns that the troubled condominium loan could bust the municipal budget.
Earlier this year, Moody’s included Collingswood in a report on a handful of towns around the United States that had suffered "super" downgrades after guaranteeing debts incurred by private developers. A low rating typically forces borrowers such as Collingswood to pay higher rates to investors willing to buy their bonds and notes.
In a statement issued after the new Moody’s report, Maley said, "We’re happy to have an appropriate rating again, but it was a frustrating and unnecessary roadblock.
“We have always been confident we’d be back at investment grade," he added.
Moody’s had cut Collingswood’s rating in reaction to the borough’s guarantee of debt incurred for the LumberYard Condos development after the development defaulted because of weak condo sales.
"In taking the downgrade action, Moody’s cited concern that the borough would not be able to sell its notes," but Collingswood conducted successful debt sales in September and May, even with the lower rating, Maley said.
"We made no changes to the LumberYard project or our borough finances to convince Moody’s of our viability. We just kept moving along as scheduled," refinancing the LumberYard debt, the mayor said, "and Moody’s had to come to the realization that we are not, and never were, at any risk that would justify junk-bond status."