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.
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