NEW YORK (Reuters) - Standard & Poor’s cut the credit rating of Puerto Rico’s Government Development Bank (GDB) to ‘CC’ from ‘CCC-’ on Tuesday, saying a near-term default at the U.S. territory’s financing arm was a virtual certainty.
The downgrade comes after the GDB said it may seek to buy back up to $4 billion of notes at below par as the U.S. commonwealth attempts to restructure up to $72 billion in debt, according to a regulatory filing on Friday.
“We would deem such an exchange as distressed and consider it a default under our criteria,” said Standard & Poor’s credit analyst Brendan Browne in a statement.
Standard & Poor’s ‘C’ rating is a non-investment grade that indicates a high risk of default.
The GDB is set to make a $93.7 million payment due to Puerto Rico Public Finance Corp on Aug. 1.
Puerto Rico has asked holders of its debt to enter into a voluntary restructuring after its governor, Alejandro Garcia Padilla, said in late June that the Caribbean island of 3.6 million could not pay what it owes.
Reporting by Edward Krudy; Editing by Lisa Shumaker