NEW YORK--(BUSINESS WIRE)--Fitch Ratings takes the following actions on the City of Bell, California's (the city) general obligation (GOs) and pension obligation bonds (POBs):
--Approximately $50 million in outstanding city GOs downgraded to 'B' from 'BB' and withdrawn;
--Approximately $7.5 million in outstanding Bell Public Financing Authority taxable POBs, series 2005 downgraded to 'B-' from 'BB-' and withdrawn.
These ratings were placed on Rating Watch Negative Aug. 16. With today's actions, the Rating Watch Negative on both ratings is no longer applicable. Fitch will no longer provide coverage of these ratings.
The downgrades are based on publicly available information that indicates an increase in near-term credit risk. The withdrawals are due to city management's lack of response to Fitch's attempts to gain the information needed to continue to accurately assess the city's credit quality.
Credit risks include a prospective default on a sizable $35 million unrated privately placed debt obligation due Nov. 1, 2010 absent an extension by the bondholder or a refinancing. Fitch believes the city will have difficulty refinancing this obligation given recent revelations of weak city management and likely financial strain. Weak management is evidenced by extraordinarily high salaries given to some former city officials, which are the subject of a recently- filed lawsuit by California's Attorney General, an illegal property tax rate increase and related rebate, and the debt exposure referenced above. The lawsuit and an ongoing criminal investigation could pressure what Fitch believes are already weakened city finances.
Additional information is available at www.fitchratings.com
In addition to the sources of information identified in the U.S. Municipal Tax-Supported Rating Criteria/Revenue-Supported Rating Criteria this action was additionally informed by information from Creditscope and the California State Controller's office.
Applicable Critera and Related Research:
'Tax-Supported Rating Criteria', 13 Aug. 13, 2010.
'U.S. Local Government Tax-Supported Rating Criteria', Dec. 21, 2009.
For information on Build America Bonds, visit www.fitchratings.com/BABs.
Applicable Criteria and Related Research:
U.S. Local Government Tax-Supported Rating Criteria
Tax-Supported Rating Criteria