2/20/2015
SAN JUAN – Moody’s Investors Service on Thursday followed Standard & Poor’s lead by downgrading $48 billion worth of Puerto Rico’s bonds, already rated as “junk,” and warning that the U.S. commonwealth might default on its debt within the next two years.
“Tax reforms now before the legislature, which are uncertain in their timing and their results, further signal a rising degree of political risk that could ultimately cause outcomes unfavorable to bondholders,” the agency stated in a communique.
“Weakening liquidity and economic deterioration may put increasing pressure on the commonwealth’s credit position in coming months, heightening the risk of default on central government obligations,” Moody’s added.
The risk rating agency lowered the rating of Puerto Rican debt by two levels – from B2 to Caa1 – which means that it considers investments in the Caribbean island to come with “substantial risk.”
Moody’s declared that slow growth had led to a falloff in tax revenues that could worsen the island’s liquidity position.
The administration of Gov. Alejandro Garcia Padilla is interested in instituting a 16 percent value-added tax, or VAT, that could raise up to $1.5 billion in revenue, a move that would help the government reduce its $73 billion public debt.
The government is also trying to organize the issuance of $2 billion in bonds with a group of hedge funds.
Moody’s decision comes exactly a week after Standard & Poor’s downgraded the island’s general obligation (GO) bonds.
source
SAN JUAN – Moody’s Investors Service on Thursday followed Standard & Poor’s lead by downgrading $48 billion worth of Puerto Rico’s bonds, already rated as “junk,” and warning that the U.S. commonwealth might default on its debt within the next two years.
“Tax reforms now before the legislature, which are uncertain in their timing and their results, further signal a rising degree of political risk that could ultimately cause outcomes unfavorable to bondholders,” the agency stated in a communique.
“Weakening liquidity and economic deterioration may put increasing pressure on the commonwealth’s credit position in coming months, heightening the risk of default on central government obligations,” Moody’s added.
The risk rating agency lowered the rating of Puerto Rican debt by two levels – from B2 to Caa1 – which means that it considers investments in the Caribbean island to come with “substantial risk.”
Moody’s declared that slow growth had led to a falloff in tax revenues that could worsen the island’s liquidity position.
The administration of Gov. Alejandro Garcia Padilla is interested in instituting a 16 percent value-added tax, or VAT, that could raise up to $1.5 billion in revenue, a move that would help the government reduce its $73 billion public debt.
The government is also trying to organize the issuance of $2 billion in bonds with a group of hedge funds.
Moody’s decision comes exactly a week after Standard & Poor’s downgraded the island’s general obligation (GO) bonds.
source
No comments:
Post a Comment