Wednesday, November 22, 2017

Puerto Rico issuers suffer more credit downgrades

By on April 11, 2017

This August 2010 file photo shows a sign for Moody's Corp. in New York. Moody's is expected to report financial earnings Friday, Oct. 21, 2016. (Mark Lennihan, File/AP)

A sign for Moody’s Corp. in New York. (Mark Lennihan, File/AP)

SAN JUAN – Moody’s Investors Service has lowered the ratings on debt of the Government Development Bank and five other Puerto Rico issuers with a total of approximately $13 billion outstanding.

The commonwealth’s outlook, and the outlooks for seven affiliated obligors linked to the central government, have been revised to negative from developing.

The announcement was made in a credit opinion dated April 5.

Moody’s downgraded $156 million from the Puerto Rico Industrial Development Co. (Pridco) from Caa3 to Ca; about $4.1 billion from the GDB from Ca to C; and about $3.15 billion from the Employees Retirement System from Ca to C.

The entity also downgraded $1.7 billion from the Puerto Rico Infrastructure Financing Authority (Prifa) from Ca to C; about $3.4 billion from the Highways and Transportation Authority (excluding 1968 Resolution) from Ca to C; and about $386 million from the Puerto Rico Convention Center District Authority from Ca to C.

“The downgrades and outlook revisions reflect persistent pressures on Puerto Rico’s economic base that indicate a diminishing perceived capacity to repay. While we continue to believe that essentially all of Puerto Rico’s debt will be subject to default and loss in a broad restructuring, the securities being downgraded face more severe losses than we had previously expected, in the light of Puerto Rico’s projected economic pressures,” the credit rating company said.

For this reason, Moody’s said it downgraded to C from Ca not only the senior notes issued by the now defunct GDB, but also bonds issued by the Prifa and backed by federal rum tax transfer payments, the Convention Center District Authority’s hotel occupancy tax-backed bonds, the Employees Retirement System’s bonds backed by government pension contributions, and the 1998 Resolution bonds of the Puerto Rico Highways and Transportation Authority.

In addition, it lowered the rating on the Pridco’s commercial property rent-secured bonds to Ca from Caa3.

It also affirmed ratings on securities for which it believes “ratings are still consistent with likely bondholder recoveries: general obligation and guaranteed debt (Caa3); Sales Tax Financing Corporation, or COFINA [Sales Tax Financing Corp.] (Caa3 senior, Ca subordinate); Puerto Rico Aqueduct and Sewer Authority (Caa3); University of Puerto Rico (Ca) system and facilities bonds; the Municipal Finance Agency (Ca); the 1968 Resolution bonds of the Highways and Transportation Authority (Ca), and the Public Finance Corporation,” the rating agency added.

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