Standard s Downgrades Puerto Rico -- Update

By Josh Beckerman 

Standard & Poor's Ratings Services has lowered its general obligation rating for Puerto Rico one notch, to BB--two notches into junk status--from BB+, one of several reactions by rating firms to new legislation that allows the overhaul of debts of some public entities.

On June 27, S&P placed the general obligation rating on CreditWatch with negative implications.

S&P reiterated its concerns about the debt-overhaul legislation on Friday. S&P believes the bill is "indicative of the mounting economic and fiscal challenges for the commonwealth as a whole."

S&P said, although it views the recent enactment of a fiscal 2015 budget that "significantly improves structural alignment" as a favorable sign, "we nevertheless continue to view the commonwealth's fiscal situation as precarious."

S&P also lowered certain other ratings, including those of the Puerto Rico Sales Tax Financing Corp.'s first lien sales tax bonds and the Puerto Rico Highways and Transportation Authority.

S&P said the ratings have been removed from CreditWatch and assigned a negative outlook.

Puerto Rico bond prices fell following the enactment of the Puerto Rico Public Corporation Debt Enforcement and Recovery Act on June 26.

Fitch Ratings on Wednesday cut the rating of Puerto Rico's general obligation bonds one notch. Puerto Rico's Treasury Department and Government Development Bank issued a joint statement calling Fitch's assumptions "erroneous."

On July 1, Moody's Investors Service downgraded Puerto Rico's bond rating to B2 from Ba2.

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