Moody’s upgrades Atlantic City issuer rating to Ba2

Moody’s Investors Service has upgraded the city of Atlantic City’s long-term issuer rating to Ba2 from Ba3, according to a Thursday announcement.
The outlook remains “positive.”
The upgrade of the long-term issuer rating to Ba2 reflects the city’s improved financial performance and liquidity. The rating also incorporates the recent recovery, but reliance on the casino industry and the ongoing efforts to diversify. The rating is also informed by the continued, strong oversight by the state of New Jersey (A2 stable).

The issuer rating is equivalent to the city’s hypothetical general obligation unlimited tax, or GOULT, rating. Although the city has $315.9 million in GOULT debt, none of it is has an underlying rating from Moody’s, though much of it carries an A3 enhanced rating from the New Jersey Municipal Qualified Bond Program.

The positive outlook reflects expectations that, despite the lingering effects of the pandemic, the rise of inflation and the risk of recession, Atlantic City will continue making strides in improving its governance and finances.

While the economic headwinds have caused issues, the negative credit consequences are offset by the improved management of city operations and the more predictable payment in lieu of taxes, or PILOT, payment structure for casinos.

The outlook also incorporates the continued state oversight.