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ATLANTIC CITY, N.J. (AP) — Atlantic City is likely to default on $3.4 million worth of debt — and become more likely to go bankrupt — if a loan promised by the state isn't received by Monday, a Wall Street firm said.
Moody's Investors Service issued a report Wednesday saying the nearly broke city is likely to default on a debt service payment if it doesn't get a $74 million loan the state agreed to in May.
Negotiations on the terms of the loan are continuing.
The loan was part of a temporary agreement reached between the state and the city to allow it to get its finances in order by November. If that doesn't happen, the state is poised to seize control of the city's finances and major decision-making power.
"Absent any receipt of state support, we believe a default would likely set off a series of missed debt payments and revive the prospect of Atlantic City filing for bankruptcy," Moody's wrote in the report.
The firm said the loan would help the city avoid the default date and make payments on the additional $18.6 million owed in debt service for the remainder of 2016.
Republican Mayor Don Guardian said at a residents' meeting Tuesday night that the city and state are close on agreeing to terms of the loan.
The city's finances have crumbled as its main employer, the casino industry, has contracted. Four of the city's 12 casinos went out of business in 2014, and surviving casinos have successfully challenged their tax assessments, blowing large holes in the city budget.
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