Moody’s noted the obvious this week: Miami’s issues with the Securities and Exchange Commission won’t be helpful when it comes to borrowing more money from Wall Street.
The ratings firm issued a report calling the recent SEC charges against Miami a “credit negative,” a term for an event that could eventually prompt Moody’s to downgrade a borrower’s credit rating. That hasn’t happened yet in the wake of the SEC charging Miami with securities fraud on July 19. Moody’s still has Miami debt rates as A2, which is investment grade.
The SEC, which regulates stocks, bonds and investments, alleges Miami omitted key information in reports to bond holders — essentially, the Wall Street investors who loan money to Miami. Moody’s noted the action could result in “significant financial penalties.”
Moody’s “outlook” for Miami is negative, meaning a downgrade is more likely than an upgrade. The credit rating impacts how high of an interest rate bond buyers will demand to take on the debt, whether it’s being resold by an investor or by Miami itself in a bid to borrow more money.
Moody’s noted in the report: “We have a negative outlook on the city’s A2 rating because of the city’s positive but narrow audited cash and reserve position and above average fixed costs, and because of risks inherent in the ongoing SEC investigations,’’ the report stated.