In another body blow, S&P puts Brockton on 'credit watch.' What does that mean?

Chris Helms, The Enterprise
·2 min read

BROCKTON — When people talk stocks, you'll hear how the "S&P 500" did today. It's named for Standard & Poor's, the credit rating agency. On Friday, the company put Brockton on a credit watch.

It adds S&P to the list of people and organizations keeping a close eye on Brockton's financial troubles. If S&P does downgrade the city's debt, Brockton's cost of borrowing money could go up as bond buyers calculate greater risk to their investment.

S&P says it's a coin flip whether Brockton's general obligation bonds could be lowered by one or more notches. In the careful and sometimes proprietary vocabulary used by S&P, "The CreditWatch placement reflects likely deterioration in the city's financial position following a significant budgetary shortfall in the city's school department," the agency said in a press release.

"We anticipate resolving the CreditWatch once we receive more detailed information from management about the nature of the operating deficit, and what steps Brockton must take to achieve and maintain structural balance across the city and the school department," said S&P Global Ratings credit analyst Lauren Freire.

Brockton Mayor Sullivan address the media at the Good Samaritan Hospital press conference on Wednesday, Feb. 21, 2024. Sullivan spoke of his love for the hospital and how his kids were all born there.
Brockton Mayor Sullivan address the media at the Good Samaritan Hospital press conference on Wednesday, Feb. 21, 2024. Sullivan spoke of his love for the hospital and how his kids were all born there.

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The ratings agency said it expected to make a decision on the possible downgrade within three months.

While not unexpected, the potential bond downgrade is another body blow to the city's shaky finances. Mayor Robert F. Sullivan said at a city council committee meeting Monday that Moody's, a rival credit rating agency, may take similar action. "We have stellar credit," the third-term mayor told attendees.

S&P's "AA-" rating, which the city currently holds, is an "investment grade" rating as opposed to lower "speculative grades" at BBB ratings and below. The firm says the AA- rating indicates "Strong capacity to meet financial commitments."

Moody's currently gives Brockton bonds a grade of A1. Moody's scale goes from best (Aaa) to worst (C). The agency says A bonds are "judged to be upper-medium grade and are subject to low credit risk." The "1" shows Brockton bonds rank on the higher end of their category.

Brockton's Chief Financial Officer Troy Clarkson talks to the Brockton School Committee about the school budget at the special School Committee meeting on Thursday, Sept. 14, 2023, at Brockton High School.
Brockton's Chief Financial Officer Troy Clarkson talks to the Brockton School Committee about the school budget at the special School Committee meeting on Thursday, Sept. 14, 2023, at Brockton High School.

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S&P ratings scale

Here is the scale of S&P ratings, from best to worst based on capacity to meet financial commitments. Ratings may also include a plus or minus:

  • AAA — "Extremely strong"

  • AA — "Very strong" (Brockton's current rating is AA-)

  • A — "Strong"

  • BBB — "Adequate"

  • BB — "... faces major ongoing uncertainties ..."

  • B — More vulnerable to adverse conditions than BB

  • CCC — "Vulnerable" to default

  • CC — "Highly vulnerable" to default

  • C — "Highly vulnerable" to default with lowered expectations on recovery

  • D — Default; this category includes bankruptcy

Source: S&P Global

Send your news tips to reporter Chris Helms by email at CHelms@enterprisenews.com or connect on X at @HelmsNews.

This article originally appeared on The Enterprise: S&P puts Brockton on credit watch, could downgrade bond rating