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S&P: GDB Credit Rating Lowered to ‘D’ after Missed Payments

By on December 12, 2016

GDB BGFSAN JUAN – S&P Global Ratings has lowered its Puerto Rico Government Development (GDB) Bank credit rating to ‘D,’ or default, from ‘SD,’ for selective default, and lowered its issue-level ratings on the financial institution’s series 2006-B bonds to ‘D’ from ‘CC.’

In a written announcement, the rating company said the downgrade follows confirmation of the GDB’s missed principal and interest payments due Dec. 1.
On Friday, Dec. 9, “the trustees of the aforementioned securities, through an Electronic Municipal Market Access filing,” confirmed that the GDB didn’t make $19.1 million of principal and about $10.6 million of interest payments on certain senior bonds. With the Dec. 1 non-payment, “the GDB is now delinquent on all of its rated debt issues outstanding – on either principal or interest, or both. As a result, in addition to lowering the 2006 series B senior notes rating to ‘D’, we are also lowering our ICR [issuer credit rating] on GDB to ‘D’,” S&P explains in its report.

A press release puts the rating agency’s actions into context by providing some background on the GDB’s relegated roles. With the passage of the Puerto Rico Emergency Moratorium and Financial Rehabilitation Act in April, most of the GDB’s functions and responsibilities have already been transferred to the Puerto Rico Fiscal Agency & Financial Authority (AAFAF).

“As part of that restructuring, the government has moved most of its treasury deposits to private commercial banks. The new financial authority has assumed the GDB’s role as the island’s fiscal agent and financial adviser, and is overseeing the commonwealth’s debt restructuring efforts.

At this stage, we believe GDB’s existence as a viable operating entity is highly uncertain, given that it is in wind-down mode. This is reflected in our ‘D’ [default] ICR on the bank,” the Friday release reads.

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