Atlantic City is moving up in its credit rating ranks. About two months ago, two of the three big credit rating companies in the US, raised Atlantic City’s rating from CCC+ to a B. One has to wonder how much of a role did legalized NJ sports betting and the local NJ sportsbooks play. Both Hard Rock Hotel & Casino and Ocean Resort Casino have contributed significantly to the city’s treasury as well, helping stabilize Atlantic City’s financial situation.
Weeks later, the third big credit rating agency, Moody, also raised AC’s status to B2, which is up four positions from its previous Caa3. B2 is still not an investment worthy credit rating according to the company, however, it’s a significant improvement from the previous rating, which is considered a very high credit risk.
These reports show that AC is putting in the effort to restore its financial situation, which was just short of disastrous in the recent years.
The Moody system uses 22 different tiers to judge the credit-worthiness of a given entity, in this case, Atlantic City. These tiers signify how much of a risk the city is to potential creditors and investors.
A rating of B2 puts Atlantic City about at one-third on the scale, meaning it is not necessarily an appealing investment target. Moody still classifies AC as carrying a high credit risk and shows its financial stability as questionable, however, the system admits that the city is currently carrying out its financial obligations and is, for the time being, stable.
The other two big credit rating companies Standard & Poor’s and Fitch use a slightly different, but analogical scale for measuring credit ratings.
A B2 in Moody’s is relatively equal to B in Standard & Poor’s. Their official definition for this tier is:
“An obligor is MORE VULNERABLE than the obligors rated 'BB', but the obligor currently has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitments.”
For comparison, the previous category, Caa3, which is just two positions higher than the absolute bottom of the Moody scale, placed AC in dire risk of not meeting its financial commitments.
Experts link the Caa3 category with organisations on the verge of bankruptcy.
In short, all three credit rating companies used to have a very poor view of Atlantic City’s financial situation. Recent improvements, including the launch of the two new casinos and the added revenue from sports betting, helped the agencies to adopt a more favorable attitude.
Among the new improvements in Atlantic City are the two revamped casinos, Hard Rock and Ocean Resort Casino.
Both casinos had a successful launch in the summer. The figures indicate that instead of redistributing the existing base of players and customers in the AC casino industry, the additions created new markets.
Hard Rock recorded revenue of more than $30 million for September, while Ocean Resort added almost $20 million.
While the new credit ratings marks a significant improvement, Atlantic City will remain under state control for the time being.
Gov. Phil Murphy was expected to relieve AC from state supervision, however, the governor appointed a special counsel to look into the matter. Unfortunately for the city, a 64-page report was published in September detailing many improvements necessary before the state should step down and allow the city to run autonomously.
At the time, the only optimist about Atlantic City’s future was its mayor, Frank Gilliam who was adamant about working towards reclaiming AC’s independence. Mayor Gilliam told the press, “The citizens of Atlantic City deserve to have their local elected officials control their destiny.”
In light of the recent credit rating changes, Gov. Phil Murphy also expressed his optimism about working in the right direction. He praised the local officials in Atlantic City for their collaborative and cooperative efforts to turn the city into a long-term sustainable and financially viable community.
More praise came from Lisa Ryan, spokeswoman for the Department of Community Affairs. She stated that the new ratings act as recognition for the hard work to restore a sound financial footing in Atlantic City.