Wall Street credit rating agency Moody’s Investors Service has a good news and bad news for the financially struggling Atlantic City.
For the good news, Moody’s pointed out that the loan that the state of New Jersey injected to Atlantic City has prevented the state’s gaming capital from defaulting on its debts.
Moody’s, on the other hand, summed up the bad news in three words: Trump Taj Mahal.
According to news website NJ.com, Moody’s has sounded alarm that the closure of Taj will spell disaster to the already cash-strapped Atlantic City.
It would be recalled that Taj’s management firm Tropicana Entertainment announced that Taj will cease its operations after Labor Day after failing to reach agreement with its striking unionized workforce.
The closure of Taj, according to Moody’s, will put more pressure on Atlantic City’s finances which had been heavily reliant on casino revenues. The Taj will be the fifth Atlantic City gambling hall to shutter in two years. The casino has notified government officials that more than 2,800 workers will be laid off.
“The financial position remains dire given its dependence on a shrinking casino industry,” Moody’s said.
While it believes that the city’s remaining casinos will likely “capture a portion” of the Taj’s revenue, Moody’s made a grim forecast that gambling revenue across the city is “likely to decline.” It warned that the Taj’s closure could also have a “knock-down effect” on the city’s new program to have casinos make payments in lieu of taxes.
On a positive note, Moody’s believe that the state’s $73 million loan saved Atlantic City from defaulting on its debt within the next few months. The credit-debt watcher is convinced that there was a “high probability” that Atlantic City had defaulted on its debt if it wasn’t rescued by the state.
Gov. Chris Christie signed in May a rescue package giving Atlantic City officials until November to create a financial blueprint for the next five years.
Otherwise, the state will be authorized to take over large parts of the municipal government — something local leaders say will strip the city of its autonomy.
Though Moody’s said Atlantic City’s bond rating remains in junk status, the loan is a “credit positive” for the city.