NEW YORK, April 5 (Reuters) - Moody’s Investors Service on Wednesday lowered ratings on $13 billion of Puerto Rican bonds, including debt from the U.S. territory’s now-defunct former fiscal agent, the Government Development Bank.
Moody’s said it downgraded bonds from six Puerto Rican issuers, but affirmed ratings on the island’s largest classes of debt - general obligation bonds guaranteed by its constitution, and so-called COFINA debt, backed by sales tax revenue.
It downgraded to C from Ca the GDB’s senior notes, as well as bonds issued by the Puerto Rico Infrastructure Financing Authority, backed by rum taxes; bonds issued by its convention center authority, backed by hotel occupancy taxes; debt of the island’s largest retirement system, backed by government pension contributions; and the 1998 Resolution bonds of the island’s highway authority.
It downgraded to Ca from Caa3 bonds issued by the Puerto Rico Industrial Development Company, backed by commercial property rent.
“The negative outlook is consistent with ongoing economic pressures, which will weigh on (Puerto Rico‘s) capacity to meet debt and other funding obligations, potentially driving bondholder recovery rates lower as debt restructuring efforts proceed,” Moody’s said in its report.
In addition to GO and COFINA debt, Moody’s affirmed ratings on University of Puerto Rico facilities bonds, the highway authority’s 1968 resolution bonds, and debt issued by the island’s municipal finance agency, sewer authority and Public Finance Corp.
Puerto Rico is trying to restructuring $70 billion in total debt in hopes of steering itself out of an economic crisis marked by a 45 percent poverty rate, unemployment that is more than twice the U.S. average, rampant emigration, failing schools and near-insolvent public health and pension systems.
Its benchmark 2035 GO bonds have plummeted since March 13, when the island’s federal financial oversight board approved a fiscal turnaround plan that forecasts only $800 million a year available to pay debt, less than a quarter of what Puerto Rico owes. (Reporting by Nick Brown; Editing by Leslie Adler)