Moody’s Downgrades $13 Billion of Puerto Rico Bonds, Revises Outlook to Negative from Developing

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NOTE: On April 10, 2017, the list of affected credit ratings accessible via hyperlink from this press release was corrected as follows: For the April 2017 rating action, the ratings for the Puerto Rico Highway & Transportation Authority’s Highway Revenue Refunding Bonds, Series AA, Highway Revenue Refunding Bonds, Series 2005 Series BB and Highway Revenue Refunding Bonds, Series CC were corrected to Ca from C.

New York, April 05, 2017 — Summary Rating Rationale

Moody’s Investors Service has lowered the ratings on debt of the Government Development Bank and five other Puerto Rico issuers, with a total of approximately $13 billion outstanding. The commonwealth’s outlook, and the outlooks for seven affiliated obligors linked to the central government, have been revised to negative from developing.

The downgrades and outlook revisions reflect persistent pressures on Puerto Rico’s economic base that indicate a diminishing perceived capacity to repay. While we continue to believe that essentially all of Puerto Rico’s debt will be subject to default and loss in a broad restructuring, the securities being downgraded face more severe losses than we had previously expected, in the light of Puerto Rico’s projected economic pressures. For this reason, we downgraded to C from Ca not only the senior notes issued by the now defunct Government Development Bank, but also bonds issued by the Puerto Rico Infrastructure Financing Authority and backed by federal rum tax transfer payments, the Convention Center District Authority‘s hotel occupancy tax-backed bonds, the Employees Retirement System‘s bonds backed by government pension contributions, and the 1998 Resolution bonds of the Puerto Rico Highways and Transportation Authority. In addition, we have lowered the rating on the Puerto Rico Industrial Development Company‘s commercial property rent-secured bonds to Ca from Caa3.

We also have affirmed ratings on securities for which we believe ratings are still consistent with likely bondholder recoveries: general obligation and guaranteed debt (Caa3); Sales Tax Financing Corporation, or COFINA (Caa3 senior, Ca subordinate); Puerto Rico Aqueduct and Sewer Authority (Caa3); University of Puerto Rico (Ca) system and facilities bonds; the Municipal Finance Agency (Ca); the 1968 Resolution bonds of the Highways and Transportation Authority (Ca), and the Public Finance Corporation (C).

Please click on this link for the List of Affected Credit Ratings. This list is an integral part of this Press Release and identifies each affected issuer.

Rating Outlook

The negative outlook is consistent with ongoing economic pressures, which will weigh on the commonwealth’s capacity to meet debt and other funding obligations, potentially driving bondholder recovery rates lower as debt restructuring efforts proceed.

Factors that Could Lead to an Upgrade

  • Any negotiated agreements or judicial actions that point to stronger bondholder recoveries than indicated in current ratings
  • Increases in federal government assistance, under existing or new programs, that would materially improve bondholder recovery prospects

Factors that Could Lead to a Downgrade

  • Unilateral actions by the commonwealth’s federal oversight board or by a judicial authority that point to decreased bondholder recoveries
  • Negotiated restructuring efforts that are likely to reduce bondholder recoveries
  • Protracted legal confrontations during which payment of debt service is suspended

Legal Security

Various, including the commonwealth’s general obligation and pledges of specific taxes and other revenue sources.

Use of Proceeds

Not applicable

Obligor Profile

Puerto Rico is a self-governing territory of the United States. It operates under a constitution approved in 1952. The island’s population, now 3.41 million, has been declining as Puerto Ricans in increasing numbers have moved to the mainland US in search of work. The nature of Puerto Rico’s relationship with the US – whether to retain its current status as a commonwealth or to become a state – is a central political issue on the island. The two dominant Puerto Rican political parties are defined by their views on statehood: the Partido Nuevo Progresista (PNP) advocates statehood, while the Partido Popular Democratico is in favor of continued commonwealth status. A smaller, third party favors independence. Our ratings do not contemplate a change in the island’s relationship with the US.


The principal methodology used in rating the Commonwealth of Puerto Rico, Puerto Rico Municipal Finance Agency, Puerto Rico Highways & Transportation Authority, Puerto Rico Aqueduct and Sewer Authority, Government Development Bank for Puerto Rico, Puerto Rico Industrial Development Company, and Puerto Rico Public Sales Tax Financing Corp. debt was US States Rating Methodology published in April 2013. An additional methodology used in rating the Commonwealth of Puerto Rico’s Series 98A, Series 2001 E, 2002 Series A, 2003 Series A,B and C, Series 2004A and B, 2011 Series A, 2011 Series B and 2012 Series A was Lease, Appropriation, Moral Obligation and Comparable Debt of US State and Local Governments published in July 2016. The principal methodology used in the University of Puerto Rico rating was Global Higher Education published in November 2015. Please see the Rating Methodologies page on for a copy of these methodologies.

Regulatory Disclosures

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on for additional regulatory disclosures for each credit rating.

Edward Hampton
Lead Analyst
State Ratings
Moody’s Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Emily Raimes
Additional Contact
State Ratings
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653