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Moody’s Raises Central Falls Debt Rating After Bankruptcy

Central Falls had its credit rating raised two steps by Moody’s Investors Service, citing reduced fiscal strains after Rhode Island’s smallest city emerged from bankruptcy last month.

Debt-service payments were maintained by Central Falls as it became the first city in state history to enter bankruptcy last year. A court-approved exit plan calls for full repayment to bondholders while employee pensions are cut. Moody’s also raised its outlook for the credit to positive.

“The bankruptcy process has resulted in a significant reduction in the financial pressure related to employee salaries, pensions and healthcare,” Moody’s said today in a report. Its B2 rating on the city’s $14.7 million of general-obligation debt remains five levels below investment grade.

During its 13 months under court protection, the city moved from “pain to a sincere hope,” U.S. Bankruptcy Judge Frank Bailey said last month at a court hearing in Providence, the state capital. The Chapter 9 case was the quickest municipal-debt adjustment for a city in U.S. history, he said.

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