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Latino Daily News

Saturday February 8, 2014

Moody’s Downgrades Puerto Rico’s Credit Rating to Ba2

Moody’s Downgrades Puerto Rico’s Credit Rating to Ba2

Photo: Moody's Investors Service

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Moody’s Investors Service on Friday became the second ratings agency this week to downgrade Puerto Rico’s credit rating to junk, citing the U.S. territory’s persistent economic weakness.

Moody’s said it lowered the Caribbean island’s general obligation bond rating two notches from Baa3, the lowest investment-grade category, to Ba2.

“The problems that confront the commonwealth are many years in the making, and include years of deficit financing, pension underfunding, and budgetary imbalance, along with seven years of economic recession,” the ratings agency said.

Just three days after Standard & Poor’s dropped the island’s debt to junk-bond status, Moody’s said Friday that Puerto Rico was in a “position where its debt load and fixed costs are high, its liquidity is narrow, and its market access has become constrained.”

“In the face of these problems, the administration has taken strong and aggressive actions to control spending, reform the retirement systems, reduce debt issuance, and promote economic development,” it said.

Despite those steps, “in our view the commonwealth’s credit profile is no longer consistent with investment-grade characteristics.”

“While some economic indicators point to a preliminary stabilization, we do not see evidence of economic growth sufficient to reverse the commonwealth’s negative financial trends,” the ratings agency said, assigning a continued negative outlook for Puerto Rico’s credit rating.

“Without an economic revival, the commonwealth will face difficult decisions in coming years, as its debt and pension costs rise,” Moody’s added.

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