Moody's downgrade complicates A.C. debt refinancing

It didn't take long for the massive downgrade of Atlantic City's debt last week by Moody's Investors Service Inc. to have an impact on the city's finances.

Atlantic City's revenue director, Michael Stinson, said Monday that the city might have to change gears on the refinancing of $12.8 million in debt due next Tuesday.

"It may become a negotiated sale rather than a competitive sale," Stinson said, as consequence of the Moody's downgrade on Friday. "It's another complication in the whole situation."

Moody's six-notch downgrade followed Gov. Christie's naming Thursday of an emergency manager to develop a financial-stabilization plan that could include "the adjustment of the debts of Atlantic City," a phrase that flashed danger to the bond market.

The emergency-management team includes Kevyn Orr, who led Detroit through the nation's biggest municipal bankruptcy as an adviser.

Resorting to a negotiated sale likely means that Atlantic City is having a hard time finding buyers for the debt, experts said.

It also could mean that Atlantic City, which already devotes about 15 percent of its budget to debt service, will have to pay more to borrow. The notes the city needs to refinance by next week carry an interest rate of 1.75 percent.

Atlantic City's difficulties refinancing did not surprise Matt Fabian, a partner at Municipal Market Analytics, a research firm in Concord, Mass.

"At this point, you'd have to be out of your mind to lend Atlantic City more money," Fabian said. "Once Kevyn Orr's involved, investors should treat a city's bonds as toxic."

The sale of the new notes was expected to get underway Tuesday and be completed by next Tuesday, but the city sent out notification Monday that the sale was delayed because of anticipated heavy snow.

Atlantic City borrowed the $12.8 million in debt in 2013 to cover Hurricane Sandy repairs and pay a deposit for an Army Corps of Engineers Boardwalk project, Stinson said.

He reiterated Monday that city planned, by the end of March, to borrow $140 million to repay a $40 million state loan and $88 million owed to the Borgata casino hotel as a result of a tax-appeal settlement.

But he also said he believed managers would be looking at "creative ways to refinance" and restructure existing debt, particularly the money owed Borgata.

Officials at Boyd Gaming Corp. of Las Vegas, Borgata's managing partner, said they could not comment before their earnings release, expected in the next few weeks.