Moody's Investors Service Inc. last week warned that the debt of 30 California cities could be downgraded because of rising costs and “rigid revenue-raising constraints.”
Included on the list for a possible downgrade were Fresno, Long Beach, Oakland and Sacramento.
The review could affect $14.3 billion in lease-backed and general-obligation debt, according to the ratings agency.
The action wasn't surprising, said Kenneth Naehu, a managing director at Bel Air Investment Advisors LLC in Los Angeles, which manages about $6.5 billion.
“Those concerns were already priced in,” he said. “The market hasn't really reacted ... I think the ratings agencies are behind the curve.”
Since June, the California cities of Mammoth Lakes, San Bernardino and Stockton have filed for bankruptcy protection.
“All of California — and all of the country — for that matter, is under the kind of [financial] pressure” California municipalities face, Mr. Naehu said.
— Dan Jamieson
This story was supplemented with reporting from Bloomberg News.