Despite the estimated $50 billion economic loss in the Northeast from Hurricane Sandy, Moody’s does not expect any payment defaults on rated municipal bonds in the affected areas.
In a conference call with investors, Moody’s indicated that federal aid, property insurance and other revenue sources are expected to ensure that timely payment of principal and interest will continue.
Most issuers can fall back on debt-service reserve funds, bond insurance and other sources if there are revenue disruptions in the aftermath of the storms. Moody’s noted, several hospitals that required evacuation during the storm have already returned to service.
Transportation issuers, such as New York’s Metropolitan Transportation Authority, are gradually returning to normal service as well, providing a continuing flow of revenues. Debt-service coverage on transportation bonds has tended to be ample and will support a short-term decline, Moody’s said.
In the weeks ahead, Moody’s plans to review credits rated “Baa1” and below to monitor damage suffered and financial resources available for necessary repairs.
Focusing on the immediate future, Moody’s reviewed issuers with debt service payments due 11/1, 11/15 and 12/1. Approximately 100 issuers fall into this category. Thus far, it appears, all will meet their debt service payments as scheduled.