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Bond Bits: Ill Winds Aftermath

BY: Sarah Harney | December 2005



Few Gulf Coast issuers have reneged on outstanding bonds since hurricanes Katrina and Rita ravaged the area. But concern about their ability to continue to make payments is growing.

In November, Moody's Investors Service dropped $700 million in New Orleans debt to junk bond ratings, citing concerns about the city's ability to fund ongoing operations or credibly forecast its incoming revenues in the near or medium term.

The state is working to avoid a similar fate. The Louisiana legislature knows it can't keep spending as usual, and lawmakers are making budget cuts to cope with an estimated $1 billion in lost revenues and growing added costs.

Meanwhile, to help smaller governments in the state from defaulting, the Louisiana State Bond Commission last month approved loans of $500 million through the federal Community Disaster Loans program. The loans will cover the localities' cash flow needs until their tax bases begin to recover.

For more information on the impacts of this year's hurricanes on municipal debt, go to www.bondbuyer.com.


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