After three cities went bankrupt, many were wondering and worrying who could be next. For some, Fresno topped the list. But leaders there say Chapter 9 isn’t being considered.
Never the less, bond investors are wary of the financial health of the central valley city that declared a fiscal emergency several months ago. They fear the concept of contagion, where bankruptcy is viewed as convenient
But Fresno adopted an austere budget that was designed to add some breathing room to the city’s finances and should make bankruptcy less likely. However, the worries did drive some bond ratings lower in the city, a downgrade that could lead some investors to stay away from the city.
From the Fresno Bee:
The recent bankruptcy filings of three California cities have U.S. investors worried that Fresno could be next to go down this road, according to a major Wall Street financial house.
Vikram Rai, strategist with Citigroup Inc., said bond investors are increasingly asking about the financial health of Fresno out of concern that the city will seek court protection from its debt obligations and that millions of investment dollars will be lost.
Stockton, San Bernardino and Mammoth Lakes have filed for bankruptcy protection this summer.
Read the full article here.