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MIAMI, July 25 (Reuters) - Moody’s Investors Service put $669 million of Miami’s debt on review for possible ratings cuts on Wednesday, two days after the city was told federal regulators had determined city officials had misled bond investors about its finances.
“During the review, Moody’s will determine whether the issues identified by the SEC (Securities and Exchange Commission) are known to us and have been incorporated into our analysis of the city’s finances,” Moody’s said.
The credit ratings agency said it had placed under review: an A2 rating on $25.4 million of Miami general obligation unlimited tax bonds; an A3 rating on $226.2 million of limited ad valorem bonds; an A3 rating on $277.3 million of non-ad valorem obligations, and an A2 rating on $139.9 million of special tax obligations.
Moody’s also it would assess possible monetary or other penalties Miami may face as part of its review.
On Tuesday, Miami made public a three-paragraph letter from the Miami office of the SEC saying the regulatory agency’s staff would recommend to top commission officials that civil action such as fines or injunctions be taken against the city.
The SEC said the city have until Aug. 6 to submit testimony and arguments against the civil actions to be recommended by staff investigators to the commission’s top officials.
A lawyer for the city said Miami did not agree with the findings and planned to file arguments by that date.
The SEC began an inquiry in 2009 that centered on suspicions Miami officials had misled investors about the city’s finances during a bond sale that year, according to the Miami Herald newspaper.
Miami officials had shifted $26.4 million from the city’s capital account to its general fund, the newspaper said. The transfer eased a budget deficit and hid the effects of sharply rising staff costs that may have dissuaded some investors from buying Miami’s debt. (Reporting by Michael Connor in Miami, Editing by Gary Crosse)