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City of Worcester, MA

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Bond Rating Agencies' Recalibration

For Immediate Release: 10/20/2010 10:30 am

Worcester, MA (October 20, 2010) - Earlier this year, the three major credit rating agencies - Standard & Poor, Fitch Ratings and Moody's - underwent a global review and systematic overhaul of the way they assign grades to state and local governments. The industry refers to this overall effort as “recalibration.” Their recalibrations are an acknowledgement that state and local governments were being held to a different standard from corporate and sovereign debt. As a result, rating systems for certain public finance ratings were adjusted to denote a comparable level of credit risk as ratings in other sectors.

The three agencies were clear in their announcements that the recalibration of certain public finance ratings must not be interpreted as an improvement or a downgrade in the credit quality of those securities. It is also important to note that these changes were made in the context of a global financial review, not a review of the City’s finances.

The recalibrations have resulted in the following changes to the City’s bond ratings: A+ to an AA- (Fitch); A3 to A1 (Moody’s); and unchanged A- (Standard & Poor). Again, these adjustments do not reflect a change in the City’s creditworthiness, but a change in the way that rating agencies assign ratings.

As in past years, the City will undergo a review of its credit status later this month. After this evaluation, the agencies will issue updated credit ratings for the City based on a comprehensive review of its long-term financial management.

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