Bond Accountability Commission 2 Recommendations Page 94
In late March 2010, Moody’s downgraded CMSD’s stand-alone Bond rating from “Baa1” to “Baa2.”102 Standard & Poor’s assigned the following ratings for each level, respectively: (1) BBB+, (2) AA, and (3) AAA. Standard & Poor’s has since maintained the credit ratings at these levels, although its most recent action on September 24, 2009 was to change the credit watch outlook on all three levels to “negative,” which means the credit rating may be lowered.103 It is possible that the deteriorating property tax base and financial condition of CMSD are significant enough to result in a credit rating downgrade, which S&P has of course indicated may happen. The Ohio Department of Education may also be experiencing similar deteriorating conditions as CMSD, and so its credit rating could also be downgraded. Firms offering bond insurance are under severe financial pressure from the more general economic conditions, and may be downgraded further, as well. 104 A credit rating downgrade may result in higher interest rates on future bond issuances than otherwise would be the case.105 There would be no effect on the interest rates of CMSD’s existing Bonds because the rates were fixed at the time the Bonds were issued. Currently, a one-notch change in an un-enhanced BBB credit rating range results 102
Devitt, “Cleveland Schools Cut” (Bond Buyer Online March 31, 2010) (“affects roughly $161 million of debt”).
As discussed below, however, S&P takes the position that all of its ratings are made on a single scale, but is systematically upgrading its municipal securities ratings on S&P’s “global” scale.
With respect to credit ratings associated with bond insurance, see “Debt Enhancement Options” beginning at page 67.
See, however, n. 16.