Midwest City, OK Debt Rating Outlook Revised To Negative From Stable On Weakened Metrics

FARMERS BRANCH (S&P Global Ratings) March 27, 2020--S&P Global Ratings revised the outlook to negative from stable on Midwest City, Okla.'s debt outstanding and affirmed the 'AA-' long-term rating on the city's GO debt outstanding and 'A+' rating on the city's 2018 tax apportionment refunding bonds issued by Midwest City Memorial Hospital Authority on behalf of Midwest City. At the same time, S&P Global Ratings assigned its 'AA-' long-term rating with a negative outlook to Midwest City's approximately $6 million series 2020A GO bonds.
"The negative outlook reflects our view that the city already exhibits weaker socioeconomic metrics and financial flexibility compared with similarly rated peers, and now that the U.S. economy is in a recession, sales tax collections, which make up over 70% of general fund revenue, could sharply decline as a result," said S&P Global Ratings credit analyst Kristin Button. Based on the possibility of deficit operations and additional drawdown on reserves, it is our view that there is at least a one-in-three chance of a lower rating over the time frame of our two-year outlook. (See "Global Macroeconomic Update, March 24: A Massive Hit To World Economic Growth," published March 24, 2020, on RatingsDirect.)
We could lower the ratings if sales tax declines lead to structural imbalance and declining general fund reserves, and if socioeconomic metrics such as market value per capita worsen over the next two years.


We could revise the outlook to stable if management is able to offset any softening in sales tax revenues with expenditure cuts, rather than use of reserves, and if socioeconomic metrics remain at least stable over the next two years.
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