Following the evaluation of liquidity needs (and availability) for the Commonwealth of Puerto Rico, S&P has decided that “it doesn’t warrant an investment-grade rating”:
- *PUERTO RICO GO RATING CUT TO JUNK BY S&P, MAY BE CUT FURTHER
- *GOVT. DEVELOPMENT BANK FOR PUERTO RICO CUT TO BB FROM BBB-:S&P
- *PUERTO RICO GO RATING LOWERED TO ‘BB+’: S&P
- *PUERTO RICO REMAINS ON WATCH NEGATIVE FROM S&P
Both the G.O.s and the Development Bank have been cut. Note that 70% of muni mutual funds own this – and it is unclear if a junk rating forces (by mandate) funds to cover.
Via Bloomberg,
Puerto Rico’s general-obligation bonds were cut one step to speculative grade by Standard & Poor’s, which cited reduced access to liquidity.
The territory had $16.2 billion of debt backed by its full faith and credit as of June 30, according to the Government Development Bank for Puerto Rico, which handles capital-market transactions for the island.
About 70 percent of U.S. municipal mutual funds own Puerto Rico securities, which are tax-free nationwide, according to Morningstar Inc.
…
S&P says downgrade reflects GDB’s constrained market access, which has led to a material deterioration in liquidity position.
Downgrade follows S&P’s evaluation of liquidity for the Commonwealth including what S&P believes is a reduced capacity to access liquidity from the Government Development Bank of Puerto Rico
S&P thinks the Commonwealth’s access to liquidity either through GDB or other means will remain constrained in the medium term, even in event of a potential issuance of debt planned next month
S&P says these liquidity constraints do not warrant an investment-grade rating
via Zero Hedge http://ift.tt/1enPmfM Tyler Durden