Rating agency Standard and Poor’s downgraded Hercules Redevelopment Agency tax allocation bonds five notches Thursday, the day after the city its February bond interest payment.
The bonds went from BBB- to B ratings due, in part, to lowered assessed property value in redevelopment project areas, according to a report released by Standard and Poor’s Thursday.
"We also base the downgrade on our view of the agency's debt management and its failure to apply any pledged net tax increment revenue to its non-housing debt service payment on Feb. 1, 2012,” Credit Analyst Sussan Corson said in the report.
Hercules, which saw a 40 percent reduction in its workforce compared to last year due to dwindling funds, defaulted on a $2.4 million redevelopment bond interest payment Wednesday. As a result, the bonds’ insurer Ambac Assurance Corp. has filed a suit against the city.
A hearing is scheduled for Feb. 21 at the Contra Costa Superior Court.
*Bloomberg's coverage here.