Two days after Atlantic City's state-appointed emergency-management team released its first report, Moody's credit-rating agency gave the city another of its patented thumbs-downs, warning of a possible default.

And Standard & Poor's said it was reviewing its rating on Atlantic City's bonds, based on the report's holding open the possibility of the city delaying debt service payments.

Moody's pelted the city back in January with a six-step credit downgrade after Gov. Christie appointed Kevin Lavin, a corporate restructuring expert, and Kevyn Orr, the man who steered Detroit through its bankruptcy, to take on Atlantic City's enormous fiscal hole.

Back then, Moody's said the possibility of default in a state that previously assured the markets it would never allow cities to go bankrupt created a negative outlook for Atlantic City, as well as for other cities in the state with similarly negative financial conditions. On Monday, Christie denied that his actions had triggered the downgrade.

On Tuesday, Lavin and Orr released their report and specifically said bankruptcy was not under consideration. Instead, they proposed an additional $10 million in cuts, hundreds of layoffs, and deferred pension and health benefits. They factored in redirected casino revenue funds contained in a package of legislation awaiting a vote in Trenton. They also said they planned to use mediators to negotiate debts with creditors and unions.

But Moody's is not convinced.

"Moody's believes the EM's proposals are credit negative because they leave open the possibility of default," the company said in a statement. "Also the aggressive timeline to help the city recover relies on rapid legislative action, state aid, and timely property tax payments from struggling casinos. Furthermore, without an extension of a state loan, the city will need to access the capital markets by March 31."

Christie spokesman Kevin Roberts said in an e-mail: "We thank Kevin Lavin and Kevyn Orr for their work in putting this initial report together and look forward to carefully reviewing their findings and proposed next steps to deliver the reforms Atlantic City needs to become a thriving, self-sustaining city again."

Senate President Stephen Sweeney (D., Gloucester) blasted the emergency-management team's report as a "failed substitute for real action" that "is now having a negative influence on Atlantic City's financial condition."

"The reaction by Wall Street shows that the report is making the situation worse," Sweeney said in a statement.

He has proposed legislation that would require casinos to pay a total of $150 million annually in payments in lieu of taxes (PILOT) for two years, then $120 million a year for the next 13.

But Sweeney has said he won't move the legislation forward until Christie commits to signing it.

"The Atlantic City fiscal-reform plan has gained a lot of support at the state and local levels, but without the governor's explicit support, it would be counterproductive for the Legislature to send him the bills," Sweeney said Thursday. "The absence of his support would send another negative message to Wall Street that could have added consequences for the city's financial stability."

On Thursday, Assembly Speaker Vincent Prieto (D., Hudson) said lawmakers were still considering the legislation.

The layoffs proposed by the emergency managers "may become even a greater problem," Prieto told reporters. "Once you have residents there that now are unemployed, that's going to add to the economic woes of that city."

The city had planned to sell bonds to pay back the $40 million loan from the state but is now being sued by Borgata, which contends that the city is obligated to use a bond sale to pay the casino first. Borgata is owed $88 million from successful tax appeals, a debt that Lavin and Orr said they planned to use mediators to negotiate down.

Moody's noted that the long-term restructuring under consideration by the emergency managers includes "potential impairment to bondholders."

"We may consider any of these events to be a default or distressed exchange, in line with our Caa1 rating on the city," Moody's said.

It also questioned whether the city could rely on timely tax payments from bankrupt casinos, including Revel and Trump Taj Mahal.

Standard & Poor's, meanwhile, said its analysis "will focus primarily on the debt restructuring and refinancing that the emergency manager identifies as potential options to address the city's fiscal situation."

"Should we view these options as having a detrimental impact on bondholders, we could lower the [General Obligation] rating to as low as the CC category, barring an actual default or distressed exchange by the city."

For now, the city remains on a BB rating.