Moody's placed the city's $14 million of outstanding general obligation bonds, rated Caa1, on review for a possible upgrade.
With about 19,000 residents packed into about 1.5 square miles, Central Falls is the smallest and most densely populated city in the smallest U.S. state.
A state-appointed receiver put the tiny city into bankruptcy in August as it faced down $80 million in unfunded pension and retiree health benefit liabilities.
Moody's said that it put the city under review for a possible upgrade after the state legislature's decision to provide $2.6 million to the city's retiree pension payments.
That action increases the chances that the city will exit Chapter 9 bankruptcy, Moody's said.
The city also filed an updated bankruptcy plan with the court and has continued making debt service payments, which haven't yet been challenged by other creditors, Moody's said.
The agency expects to complete its review within 90 days.
Moody's on Friday also affirmed the Baa1 rating and assigned a stable outlook to the Rhode Island Health and Educational Building Corp.'s bonds, affecting $17 million in outstanding debt.
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