In an ominous development, Standard & Poor's has knocked down Hartford's bond rating for the second time in two weeks, declaring that "a default, a distressed exchange, or redemption appears to be a virtual certainty.''
The agency said Tuesday that it had again lowered the city's rating -- to CC from B-, a four-notch plummet. The move came a day after Mayor Luke Bronin held a conference call with Hartford bondholders, and suggested he didn't want to refinance the struggling city's debt.
Now, Standard & Poor's says it's increasingly likely that Hartford -- which expects to be short $7 million in cash in November and another $39.2 million in December -- will default on its debt. Meanwhile, with $545 million in outstanding general obligation debt, Hartford faces debt payments of about $30 million in coming weeks.
Hartford needs a cash infusion of at least $40 million in additional assistance from the legislature this fall, Bronin says. Without it, he says the city faces the possibility of bankruptcy.
"The downgrade to 'CC' reflects our opinion that a default, a distressed exchange, or redemption appears to be a virtual certainty," the agency said in a statement Tuesday. "S&P Global Ratings could take additional action to lower the rating to 'D' if the city executes a bond restructuring or distressed exchange, or files for bankruptcy.
"In our view, the potential for a bond restructuring or distressed exchange offering has solidified with the news that both bond insurers are open to supporting such a measure in an effort to head off a bankruptcy filing."
On Sept. 14, Standard & Poor's dropped Hartford's bond rating to B-, down four slots from the BB status it held earlier this month. S&P kept Hartford on a negative watch, meaning more downgrades could happen soon.
The city's bonds had already been classified as junk.
Assured Guaranty, the city's largest bond insurer, said Monday that it had made a proposal to Bronin to refinance the city's debt, pushing payments further into the future but reducing immediate contributions. The mayor, however, said he would resist any plan that burdens the city for years to come.
Debt payments in Hartford, which faces a $65 million deficit, are set to rise by tens of millions of dollars in the coming years. By 2021, the city's annual debt service is expected to top $60 million -- about 20 percent of its noneducation expenditures.
Assured's plan would keep debt payments around $40 million for the next 15 years.
Bronin earlier this month threatened to file for bankruptcy if Hartford didn't get its state aid by early November. He will need permission from Gov. Dannel P. Malloy to seek Chapter 9 protection.
Lawmakers remain deadlocked over a state budget. The House and Senate adopted a Republican spending plan this month, but Malloy has promised to veto it. The Republicans' budget did not include the extra $40 million Bronin has requested this year.
(c)2017 The Hartford Courant (Hartford, Conn.)