NEW YORK - Fitch Ratings last week downgraded Providence’s bond rating from “A” to “BBB” and characterized its outlook as “negative.” The three-level drop by the global rating agency puts the city’s rating just two steps above junk bond status.
The downgrade is the result of a continued decline in Providence’s financial flexibility over the last year, which left the city in a weak liquidity position. The risk, Fitch says, is compounded by its concern about the city’s ability to address future deficits.
The BBB rating is described by the agency as being “satisfactory at the moment.” Prior to the downgrade, Providence held the third-highest rating - “A.” If Providence’s BBB rating drops any further the city will drop from “Investment Grade” to “Non-Investment Grade.”
Fitch is also concerned about the city’s ability to generate an adequate cash flow to support current operations and close future budget gaps. •