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S&P Puts Puerto Rico Highway Bonds on Watch Negative

Standard & Poor's placed the Puerto Rico Highway and Transportation Authority's bonds on CreditWatch with negative implications.

Friday's action covers the authority's highway revenue bonds, rated BBB-plus; its senior transportation revenue bonds, rated BBB; and its subordinate transportation revenue bonds, rated BBB-minus.

"The CreditWatch placement follows PRHTA's lack of timely and satisfactory information to us to maintain our ratings in accordance with our criteria and policies," S&P analyst David Hitchcock said in a statement. "While commonwealth officials provided information [on Thursday], we have yet to determine if this information is sufficient for us to maintain our ratings on the authority."

S&P is looking for the authority's operating statistics and collateral posting requirements, Hitchcock said. Given that Moody's has given some of the authority's bonds a speculative rating, the collateral posting requirements could be important, Hitchcock said.

S&P has to review the authority regularly and was also influenced to do the review now by Moody's Investors Service two notch downgrade of the authority's debt on December 13, Hitchcock said.

S&P plans to resolve the creditwatch placement by January 15.

A spokesman for the Government Development Bank of Puerto Rico, which serves as a conduit for the authority's bonds, attributed the S&P action to temporary delays at the authority. He pointed to the Christmas holiday and the transition between gubernatorial administrations. Regarding the latter, he said some of the authority's staff have already left and the new staff will not start until the new year. These factors slowed the authority's ability to collect S& P's requested information, he said. S&P was not willing to give the authority additional time and thus put the authority on creditwatch negative, he said.

"The [S&P press] release is a little unusual because when S&P doesn't have current information, they usually withdraw the rating for lack of information," H.J. Sims senior vice president Richard Larkin wrote in an e-mail. "In this case, the highway authority's audit isn't really late (the fiscal year ends June 30, and last year's audit was done by February 15, less than 8 months after the fiscal year end and usually within S&P's acceptable time frame for an audit). I think that [S&P is] looking for updated operating information, such as gas taxes, toll receipts, toll traffic, etc. Although the bonds do not have a back-up appropriation pledge, S&P has said that the rating includes some implicit support from the Commonwealth [of Puerto Rico] itself. I would think that this recognition of implicit support would probably stop S&P from withdrawing the rating for lack of information, (but S&P could still do that if they so desired)."

The authority did not respond to a request for comment by press time.

Moody's gives the authority's transportation revenue bonds a Baa3 rating, its highway revenue bonds a Baa2 rating, and its subordinate transportation revenue bonds a Ba1 rating.

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