Moody’s Boosts Cleveland’s Bond Rating
CLEVELAND (AP) _ The city’s bonds have investment-grade ratings from the nation’s two leading bond rating firms for the first time since Cleveland defaulted on its bonds in 1978.
Moody’s Investors Service Inc. of New York said Wednesday that it had increased its rating of Cleveland’s bonds one step to Baa from Ba1.
Baa is Moody’s lowest of four investment-grade ratings, with the ratings below that considered speculative. Financial institutions are barred by law from investing in speculative securities.
Moody’s said the new rating means Moody’s considers Cleveland’s bonds medium-grade obligations, which have some ″speculative characteristcs.″
The other major bond-rating service, Standard & Poor’s Corp., already had Cleveland’s rating at its lowest investment grade of BBB, which it reaffirmed last week.
Mayor George V. Voinovich said the once-troubled city had finally been restored ″to full respectability on Wall Street.
″Moody’s is recognizing our commitment to sound fiscal management, and Wall Street now has a renewed perception of Cleveland,″ he said.
Moody’s analysts cited Cleveland’s ″moderate and well-structured debt and management’s resolve to maintain budget integrity despite continued economic distress and limited revenue-raising powers.″
The city plans to sell $35 million of general-obligation bonds soon, the third bond sale since Cleveland was able to return to the bond market.
In July 1978, when the city’s financial problems were discovered by bond- rating agencies, Moody’s dropped Cleveland from investment-grade status. The city’s investment status was gutted when it defaulted on loans to six local banks in December 1978.
Moody’s returned the city to a Ba1 rating in 1981. The city sold bonds again in 1983.
″Since the 1978 default, we have proven our ability to operate this city by balancing the budget five years in a row,″ the mayor said.