In a surprisingly pleasant move, credit rating agency Moody’s has upgraded Atlantic City‘s credit rating. The agency has moved the city from its previous rating of Caa3 up to B2, a jump of four spots.
The move reflects a more positive financial outlook for the city. While B2 is still not an investment grade rating, the upgrade could portend further climbs up in the ratings ladder and more creditworthiness for America’s Playground.
The upgrade comes as Atlantic City has experienced a significant turn for the better in its finances. The debut of two new AC casinos and shoring up of the city’s budget has generated excitement about the city for the first time in years.
What do these ratings mean?
Some might have only a vague understanding of the meanings of these ratings.
Moody’s adds a layer of complexity by using its own rating scale, rather than the one shared by its two main competitors, Standard and Poor’s and Fitch Ratings.
The ratings are a measure of the creditworthiness of the entity being rated. In other words, Moody’s issues its opinion about how likely the entity would be able to pay back a loan.
Atlantic City’s previous rating, Caa3, was the third lowest on Moody’s rating scale. In fact, the rating was so poor that Moody’s rating book defined those in this class as “judged to be of poor standing and… subject to very high credit risk.”
Other sources also indicated that entities rated Caa3 were in imminent danger of default. The bottom line is that financial experts took an exceptionally dim view of Atlantic City’s financial health… until recently.
Now, the city is in the B class of ratings. Make no mistake — this rating is not the sign of a good investment. Atlantic City’s finances remain in a rather precarious state.
However, this level of improvement speaks volumes about the excellent 2018 that the city has had. It also bodes well for the continued upward trend of things.
Atlantic City remains under state control
While the upgrade is excellent news, it is not all sunshine and roses on the shore. The city remains under administrative control by the state.
With Gov. Phil Murphy at the helm, there were hopes that his administration would end the takeover soon. Unfortunately, that scenario has not come to pass.
In fact, the state’s representative, Special Council Jim Johnson, recommended that the takeover continue back in September. He indicated in a 64-page report that the city needed to meet certain criteria before the state withdrew.
Some of those criteria included the improvement of communication between various agencies and the development of key relationships in the community. Atlantic City Mayor Frank Gilliam has expressed optimism about achieving those goals soon.
However, the takeover could potentially stretch into 2021. Hopefully, the debut of two new properties, the Moody’s ratings upgrade and the advent of NJ sports betting will help propel Atlantic City out of state administration sooner than that.