Moody’s Investors Service on Wednesday 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, Moody’s further announced.
“The downgrades and outlook revisions reflect persistent pressures on Puerto Rico’s economic base that indicate a diminishing perceived capacity to repay,” the ratings agency said.
“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,” it said.
For this reason, it downgraded to C from Ca not only the senior notes issued by the now defunct GDB, but also bonds issued by the Puerto Rico Infrastructure Financing Authority 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 Puerto Rico Industrial Development Co.’s commercial property rent-secured bonds to Ca from Caa3.
Moody’s also have 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 (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 (C).
“The negative outlook is consistent with ongoing economic pressures, which will weigh on the Commonwealth’s capacity to meet debt and other funding obligations, potentially driving bondholder recovery rates lower as debt restructuring efforts proceed,” Moody’s said.