Moody’s Raises Central Falls Debt Rating After Bankruptcy

Oct. 26 (Bloomberg) -- 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.

To contact the reporter on this story: Michael McDonald in Boston at mmcdonald10@bloomberg.net.

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net.