Standard & Poor's has dramatically downgraded the bonds that Moberly, Mo., issued to pay for a Chinese-owned sweetener plant. The credit rating agency lowered its rating (registration required) on the bonds late Thursday to CC from A-minus.
As my colleague Tim Logan reported this morning, Mamtek USA has laid off the employees it hired in Missouri, and work on the Moberly plant has halted. Moberly had guaranteed $39 million in bonds to get the plant built, and Mamtek recently missed a $2.2 million payment on the bonds.
S&P analyst John Sauter said in a statement:
The rating actions are based on our view of the city's limited ability to meet its financing agreement obligations without receipts from third-party Mamtek.
S&P says a CC rating means that debt payments are "currently highly vulnerable." Its ratings notice adds,
The ratings have been placed on CreditWatch with negative implications as we monitor further developments with respect to the availability of sufficient revenue streams to support payments on the bonds.
S&P also cut Moberly's issuer credit rating to B from A, and it downgraded a series of 2008 bonds to B-minus from A-minus. The debacle, therefore, will cost Moberly money on any borrowing it does in the future.