Puerto Rico Bond News
Moody’s Follows S&P’s Lead and Downgrades Various Commonwealth Debt
On February 7, Moody’s downgraded Commonwealth GO debt to Ba2 from Baa3, Puerto Rico Aqueduct and Sewer debt to Ba2 from Ba1, and the Sales Tax Financing Corporation’s junior lien bonds to Baa1 from A2. Moody’s maintained a negative outlook on the downgraded issues. The primary drivers of the downgrade were years of deficit financing, pension underfunding, budgetary imbalance, and seven years of economic contraction.
Puerto Rico’s Senate Approves Borrowing Bill
The Commonwealth is expecting to come to market with a $2.8 billion offering in early March. The new GO deal marks the Commonwealth’s first foray into the muni market since 2012. The new offering is expected to address the Commonwealth’s liquidity needs for the next one to two years.
The Commonwealth is expected to use the proceeds to restructure approximately $600 million of fiscal 2013 GO debt service, $575 million in fiscal 2014 debt service, and $175 million in fiscal 2013 Public Building Authority debt service. The Commonwealth also plans on redeeming approximately $873 million in short-term notes and floating rate debt.
An investor conference call which discussed the island nation’s finances and economy has helped Commonwealth GO debt stage a nice rally ahead of the bond sale.
Fitch Jumps Onboard: Downgrades GO and Puerto Rico Electric Power Authority
On February 18, Fitch Ratings downgraded the power authority’s revenue bonds to BB+ from BBB- and revised the outlook to negative from stable. The downgrade, primarily driven by Fitch’s recent rating action on Commonwealth GO debt (February 11, BBB- to BB), highlights the continuing challenges related to the weak economy and strained liquidity. The Electric Authority’s financial performance has weakened in recent years narrowing its debt service coverage ratio.
For the latest update on Puerto Rico or help evaluating municipal bonds which you currently own, call me at (319) 368-7030 or just send me an email at firstname.lastname@example.org
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