* Bond rating cut to speculative grade "CC" from "BBB+"
* City may not have sufficient funds for obligations-S&P
SAN FRANCISCO, July 11 Standard & Poor's Ratings
Services downgraded on Wednesday the San Bernardino, California,
series 1997A lease revenue refunding bonds to speculative grade
'CC' from investment grade 'BBB+' a day after the city's leaders
approved a plan for a Chapter 9 bankruptcy filing.
S&P said in a statement that it also placed the rating on
its CreditWatch with negative implications for further
S&P said it is concerned San Bernardino does not have
sufficient funds to meet it obligations in coming months.
"We believe this could affect the city's ability to pay to
the trustee the next lease payment, which supports its 1997A
lease revenue bonds," S&P said, noting the next payment to
bondholders on the debt is scheduled for September 1.
S&P said it was uncertain whether San Bernardino plans to
use general resources or its debt service reserve fund to meet
its upcoming debt service payment if it has not filed for
bankruptcy by September.
San Bernardino's city council voted on Tuesday night to file
for Chapter 9 bankruptcy, marking the third time in recent weeks
a city in the most populous U.S. state has opted to seek
protection from its creditors.
The decision followed a report by city staff that said the
city faced an imminent financial crisis.
The report said San Bernardino, a city of about 210,000
residents approximately 65 miles (104 km) east of Los Angeles,
had exhausted its reserves and projected that spending would
exceed revenue by $45 million in the current fiscal year which
began on July 1.