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Potential Puerto Rico Municipal Bond Credit Ratings Downgrades

According to UBS Financial Services, the Puerto Rico Municipal Bonds listed below are currently under review for a downgrade in credit quality by Moody’s Rating Agency. As of December 11, 2013, the Puerto Rico Municipal Bonds are currently rated “Ba1” which is considered the highest speculative grade category (i.e. junk bond):

  • Puerto Rico Public Finance Corporation (PRPFC) Commonwealth appropriation bonds
  • Puerto Rico Aqueduct and Sewer Authority (PRASA) revenue bonds
  • Puerto Rico Highway and Transportation Authority (PRHTA) subordinate transportation revenue bonds

According to UBS Financial Services, the Puerto Rico Municipal Bonds listed below are currently under review for a downgrade in credit quality by Moody’s Rating Agency. As of December 11, 2013, the Puerto Rico Municipal Bonds listed below are rated “Baa3” which is considered the lowest investment grade category:

  • Puerto Rico (Commonwealth) General obligation bonds
  • Puerto Rico Public Building Authority bonds
  • Puerto Rico Pension funding bonds
  • Puerto Rico Infrastructure Finance Authority (PRIFA) special tax revenue bonds
  • Convention Center District Authority hotel occupancy tax revenue bonds
  • Government Development Bank senior notes
  • Municipal Finance Authority bonds
  • Puerto Rico Highway and Transportation Authority (PRHTA) transportation revenue bonds
  • Puerto Rico Aqueduct and Sewer Authority (PRASA) Commonwealth guaranteed bonds

The Moody’s Global Credit Research report dated December 11, 2013 stated that approximately $52 Billion in debt financing is affected by the downgrade review. During the review period, Moody’s reports the downgrade review will focus on the following:

  • The ability and willingness of the commonwealth to access the long-term capital markets
  • Key economic indicators, including employment data, retail sales and the island’s Economic Activity Index (EAI)
  • Financial performance in coming months, including key December revenues
  • Legislative actions to reform the Teachers’ Retirement System (TRS), shore up liquidity, or take any other actions to preserve fiscal stability
  • The proposed budget for fiscal year 2015