February 7, 2014 | by Law Offices of Robert Wayne Pearce, P.A.
We told you months ago that Puerto Rico debt was going to be downgraded by one or more of the three national credit rating services, Moody’s, Fitch or Standard and Poor’s before June 2014. On Wednesday Standard & Poor’s downgraded multiple issues of Puerto Rico debt to what the Puerto Ricans describe as “Chatarra”; that is, “Junk.” This afternoon Moody’s Investors Service joined in and downgraded the Puerto Rico General Obligation bonds to Ba2 from Baa3 and all of the other agency linked debt two more notches except the Puerto Rico Aqueduct and sewer Authority bonds which only went down one more notch to Ba1. In addition, Moody’s downgraded the prized Puerto Rico Sales Tax Financing Corporation Bonds (COFINA Bonds) another notch which still leaves them with an investment grade rating. Moody’s outlook for all of these bonds remains negative.
We believe the Moody’s Standard & Poor’s downgrades of Puerto Rican debt will only accelerate the Commonwealth’s financial problems. The downgrades will increase the cost of debt service if they can ever access to public markets.
We expect a further decline across the board of at least 10% in all of the Puerto Rico bonds issued and outstanding and underlying the UBS closed-end bond funds.