Moody's Downgrades Puerto Rico's GO Debt Rating To Junk Status

(RTTNews) - Moody's Investors Service cut the general obligation rating of the Commonwealth of Puerto Rico to Ba2 from Baa3, citing insufficient economic growth to reverse its negative financial trends.

The outlook for ratings on the general obligation and the related bonds are negative.

"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. These factors have now put the commonwealth in a position where its debt load and fixed costs are high, its liquidity is narrow, and its market access has become constrained," the rating agency said on Friday.

Although the country's administration has taken strong and aggressive actions to reduce debt issuance and promote economic development, the commonwealth's credit profile is not consistent with investment grade characteristics, Moody's noted.

"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. Without an economic revival, the commonwealth will face difficult decisions in coming years, as its debt and pension costs rise," the agency warned.