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Moody's Downgrades Puerto Rico's GO Bonds, Other Debt

Moody's Downgrades Puerto Rico's GO Bonds, Other Debt
(Dollar Photo Club)

Thursday, 12 October 2017 11:54 AM

Ratings firm Moody's has downgraded Puerto Rico's general obligation bonds to Ca from Caa3, citing extensive damages from Hurricane Maria in the U.S. territory.

Senior bonds issued by the Puerto Rico Sales Tax Financing Corp and the Puerto Rico Aqueduct and Sewer Authority were also downgraded to Ca from Caa3.

Moody's said the lower ratings are aligned with its estimates of the territory's reduced debt servicing capacity, adding that Puerto Rico faces almost total economic and revenue disruption in the near-term.

Meanwhile, President Donald Trump pushed back against federal aid for Puerto Rico as the House of Representatives prepared to weigh $36.5 billion in emergency relief for the U.S. territory and other hurricane-hit areas as well as fire-ravaged California.

Lawmakers are expected to approve the bipartisan measure that will also provide relief to the storm-struck areas of Florida, Texas, and the U.S. Virgin Islands, and leaders of both major parties have lauded the bill, Reuters reported.

Trump, in several early Twitter posts, however, criticized Puerto Rico for ”a total lack of “accountability,” saying “electric and all infrastructure was disaster before hurricanes.”

While he noted it was up to “Congress to decide how much to spend,” he said: “We cannot keep FEMA, the Military & the First Responders, who have been amazing (under the most difficult circumstances) in P.R. forever!”

The content and timing of the comments, as the island struggles with the storm’s aftermath, prompted swift backlash from some Democratic lawmakers, who said such a move would amount to abandoning U.S. citizens.

“There is still devastation, Americans are still dying. FEMA needs to stay until the job is done,” Senate Democratic Leader Chuck Schumer replied on Twitter.

Representatives for the White House did not immediately respond to a request for comment on what Trump meant by his tweets.

Republican U.S. Representative Scott Perry defended Trump’s statement, telling CNN federal assistance was meant to be finite and that it was “reasonable” for the island to eventually take up its own governance.

The bill includes $18.7 billion for the Federal Emergency Management Agency’s disaster relief fund. Of that amount, $4.9 billion is earmarked for loans to local governments to ensure that the cash-strapped Puerto Rico can keep government programs operating beyond Oct. 31.

Other funds include $576.5 million for the federal government’s wildfire control efforts. Some $16 billion would go toward the National Flood Insurance Program to help it cover claims after reaching its borrowing limit.

Once passed by the Republican-led House, the Senate, also controlled by Republicans, is expected to take up the package later this month after it returns from a week-long recess.

Republican and Democratic lawmakers, however, said more money would likely be needed later.

“These funds are vital right now, in the near term, to get the aid where it is needed most,” said House Appropriations Committee Chairman Rodney Frelinghuysen, a Republican.

Democratic Representative Nydia Velázquez of New York, which has a large Puerto Rican community, said the relief package was “just the start” of federal aid to the island, where large areas remain without electricity or running water three weeks after Hurricane Maria made landfall.

Puerto Rico is burdened with nearly $72 billion in pre-hurricane debt being overseen by a federally created oversight board.

Velázquez said the funds earmarked for loans to local governments would assist Puerto Rico’s “liquidity crisis” and that steps must be taken to ensure that creditors are unable to access funds meant for disaster relief.

© 2021 Thomson/Reuters. All rights reserved.

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Ratings firm Moody's downgraded Puerto Rico's general obligation bonds to Ca from Caa3, citing extensive damages from Hurricane Maria in the U.S. territory.
moodys, downgrades, puerto, rico, go, bonds, debt
Thursday, 12 October 2017 11:54 AM
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