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Municipal Bonds at Greatest Risk of Default

America's Riskiest Municipal Bonds

Municipal bonds are issued by a city, local or state government and have long been identified as among the safest investment options in the country. However, for some local governments, the financial crisis has caused revenue to drop and bond payments less likely to occur than originally thought. CNBC.com has obtained from the lowest rated American municipal bonds that the agency covers, which are the bonds that carry the highest probability of defaulting on debt payments. None of the debt cove
Posted 11 March 2010 || Photo: Adam Gault | OJO Images | Getty Images

Municipal bonds are issued by a city, local or state government and have long been identified as among the safest investment options in the country. However, for some local governments, the financial crisis has caused revenue to drop and bond payments less likely to occur than originally thought.

CNBC.com has obtained from Fitch Ratings the lowest rated American municipal bonds that the agency covers, which are the bonds that carry the highest probability of defaulting on debt payments.

None of the debt covered by Fitch carry ratings that show "imminent" or "probable" default, but the bonds listed here carry at least a moderate default risk compared to other issuers in the country. The following bonds are tax-supported credits rated BBB- and below.

So, which US municipal bonds are at the greatest risk for default? Click ahead to find out.

By Paul Toscano

Cluberson County Hospital District, Texas

Rating: BBB- Type: General Obligation - Unlimited Tax Sector: County 'BBB' National Ratings denote a moderate default risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions are more likely to affect the capacity for timely repayment than is the case for financial commitments denoted by a higher rated category.
Photo: co.culberson.tx.us

Rating: BBB-
Type: General Obligation - Unlimited Tax
Sector: County

Fitch's definition of credit rating: 'BBB' National Ratings denote a moderate default risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions are more likely to affect the capacity for timely repayment than is the case for financial commitments denoted by a higher rated category.

Buena Vista Township, Mich.

Rating: BBB- Type: General Obligation - Limited Tax Sector: City 'BBB' National Ratings denote a moderate default risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions are more likely to affect the capacity for timely repayment than is the case for financial commitments denoted by a higher rated category.
Photo: AP

Rating: BBB-
Type: General Obligation - Limited Tax
Sector: City

Fitch's definition of credit rating: 'BBB' National Ratings denote a moderate default risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions are more likely to affect the capacity for timely repayment than is the case for financial commitments denoted by a higher rated category.

Robstown, Texas

Rating: BBB- Type: General Obligation - Limited Tax Sector: City 'BBB' National Ratings denote a moderate default risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions are more likely to affect the capacity for timely repayment than is the case for financial commitments denoted by a higher rated category.
Photo: Terry Ross

Rating: BBB-
Type: General Obligation - Limited Tax
Sector: City

Fitch's definition of credit rating: 'BBB' National Ratings denote a moderate default risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions are more likely to affect the capacity for timely repayment than is the case for financial commitments denoted by a higher rated category.

Tulia, Texas

Rating: BBB- Type: General Obligation - Limited Tax Sector: City 'BBB' National Ratings denote a moderate default risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions are more likely to affect the capacity for timely repayment than is the case for financial commitments denoted by a higher rated category.
Photo: Getty Images

Rating: BBB-
Type: General Obligation - Limited Tax
Sector: City

Fitch's definition of credit rating: 'BBB' National Ratings denote a moderate default risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions are more likely to affect the capacity for timely repayment than is the case for financial commitments denoted by a higher rated category.

Saddle Mountain Unified School District No.90, Ariz.

Rating: BB Type: General Obligation - Unlimited Tax Sector: School District 'BB' National Ratings denote an elevated default risk relative to other issuers or obligations in the same country. Within the context of the country, payment is uncertain to some degree and capacity for timely repayment remains more vulnerable to adverse economic change over time.
Photo: Saddlemountainrvpark.com

Rating: BB
Type: General Obligation - Unlimited Tax
Sector: School District

Fitch's definition of credit rating: 'BB' National Ratings denote an elevated default risk relative to other issuers or obligations in the same country. Within the context of the country, payment is uncertain to some degree and capacity for timely repayment remains more vulnerable to adverse economic change over time.

Littlefield, Texas

Rating: BB Type: General Obligation - Limited Tax Sector: City 'BB' National Ratings denote an elevated default risk relative to other issuers or obligations in the same country. Within the context of the country, payment is uncertain to some degree and capacity for timely repayment remains more vulnerable to adverse economic change over time.
Photo: Christian M. Mericle

Rating: BB
Type: General Obligation - Limited Tax
Sector: City

Fitch's definition of credit rating: 'BB' National Ratings denote an elevated default risk relative to other issuers or obligations in the same country. Within the context of the country, payment is uncertain to some degree and capacity for timely repayment remains more vulnerable to adverse economic change over time.

U.S. Virgin Islands

Rating: BB Type: General Obligation - Unlimited Tax Sector: States 'BB' National Ratings denote an elevated default risk relative to other issuers or obligations in the same country. Within the context of the country, payment is uncertain to some degree and capacity for timely repayment remains more vulnerable to adverse economic change over time.
Photo: Glowimages | Getty Images

Rating: BB
Type: General Obligation - Unlimited Tax
Sector: States

Fitch's definition of credit rating: 'BB' National Ratings denote an elevated default risk relative to other issuers or obligations in the same country. Within the context of the country, payment is uncertain to some degree and capacity for timely repayment remains more vulnerable to adverse economic change over time.

Detroit, Mich.

Rating: BB Type: General Obligation - Unlimited Tax Sector: City Rating: BB- Type: General Obligation - Limited Tax Sector: City 'BB' National Ratings denote an elevated default risk relative to other issuers or obligations in the same country. Within the context of the country, payment is uncertain to some degree and capacity for timely repayment remains more vulnerable to adverse economic change over time.
Photo: Walter Bibikow | The Image Bank | Getty Images

Rating: BB
Type: General Obligation - Unlimited Tax
Sector: City

Rating: BB-
Type: General Obligation - Limited Tax
Sector: City

Fitch's definition of credit rating: 'BB' National Ratings denote an elevated default risk relative to other issuers or obligations in the same country. Within the context of the country, payment is uncertain to some degree and capacity for timely repayment remains more vulnerable to adverse economic change over time.

Harvey, Ill.

Rating: B Type: General Obligation - Unlimited TaxSector: City 'B' National Ratings denote a significantly elevated default risk relative to other issuers or obligations in the same country. Financial commitments are currently being met but a limited margin of safety remains and capacity for continued timely payments is contingent upon a sustained, favorable business and economic environment. For individual obligations, this rating may indicate distressed or defaulted obligations with potential
Photo: AP

Rating: B
Type: General Obligation - Unlimited Tax
Sector: City

Fitch's definition of credit rating: 'B' National Ratings denote a significantly elevated default risk relative to other issuers or obligations in the same country. Financial commitments are currently being met but a limited margin of safety remains and capacity for continued timely payments is contingent upon a sustained, favorable business and economic environment. For individual obligations, this rating may indicate distressed or defaulted obligations with potential for extremely high recoveries.

Pontiac, Mich.

Rating: CCC Type: General Obligation - Limited Tax Sector: City 'CCC' National Ratings denote that default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic conditions
Photo: pontiac.mi.us

Rating: CCC
Type: General Obligation - Limited Tax
Sector: City

Fitch's definition of credit rating: 'CCC' National Ratings denote that default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic conditions