A Wall Street ratings firm says New Jersey’s takeover of Atlantic City’s assets and major decision-making power should prevent the struggling resort from defaulting on its debt at least through the end of next year.
In a note issued Monday, Moody’s Investors Service said the takeover should be enough to head off any default on the resort’s $500 million in debt through 2017.
New Jersey seized control of Atlantic City earlier the month after rejecting the city’s proposed turnaround plan. Former U.S. senator and state attorney general Jeff Chiesa assumed broad powers, including the right to overturn decisions of the city council, override or even abolish city agencies and seize and sell assets.
While New Jersey has not explicitly guaranteed Atlantic City’s debt, Moody’s noted that the state “has indicated a willingness to go to the state treasury for assistance if necessary to pay debt service.”
The agency also noted the state explicitly ruled out a bankruptcy filing for Atlantic City and rates the takeover as “a crucial step.”