The California city of Stockton's series 2006 lease revenue bonds were upgraded by Moody's Investors Service on Monday to Ba2 from Ba3, Reuters reported today. The rating agency also affirmed the Ca rating of Stockton's 2007 pension obligation bonds. The rating action, which affects approximately $71 million of bonds, comes almost a year after a bankruptcy court confirmed Stockton's plan to exit chapter 9. While the exit plan did not impact the series 2006 lease-revenue bonds, it did impose significant losses to bond insurer Assured Guaranty Municipal Corp in the series 2007 pension obligation bonds. Moody's estimated a loss of approximately 59 percent of principal from the date the city first defaulted on the series 2007 bonds. Under the reorganization plan, Assured will receive annual payments from the city, and it could receive a higher recovery if the city exceeds certain performance benchmarks beginning in fiscal year 2018, Moody's reported.
