Puerto Rico’s Debt Cut to Junk

Standard & Poor’s on Tuesday cut its credit rating on Puerto Rico, dropping the cash-strapped U.S. territory’s debt to junk-bond status on concern about its ability to access capital markets.

S&P, which had placed Puerto Rico’s rating on notice for a downgrade last month, said it now rates the Caribbean commonwealth at “BB ,” one level below investment grade. Previously it had rated it “BBB-.”
With some $70 billion of tax-free debt, Puerto Rico has a long soured economy and has for months been under threat of a ratings downgrade to junk-bond territory by all three U.S. credit ratings agencies.

Moody’s and Fitch Ratings have not announced ratings decisions.

S&P said it worried that Puerto Rico, a Caribbean island populated by 3.62 million people, has limited ability to sell more debt in the U.S.’s $3.7 trillion municipal bond market and faced possible cash shortages.

“We believe these liquidity constraints do not warrant an investment-grade rating,” S&P said in a commentary.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza