Fitch Ratings said it has downgraded the rating on the Puerto Rico Sales Tax Financing Corporation (COFINA) $6.3 billion senior lien sales tax revenue bonds and $8.9 billion first subordinate lien sales tax revenue bonds to D from C.

Puerto Rico Gov. Ricardo Rosselló
Puerto Rico Gov. Ricardo Rosselló

While COFINA has continued to make transfers to the Trustee, payments to bondholders are not being disbursed pursuant to an order of the U.S. District Court for the District of Puerto Rico, Fitch said.

The court has ordered the Trustee to interplead the June 1 payment and any future payments of principal and interest on senior and subordinated COFINA sales tax bonds until a final order of the court resolves the dispute among bondholders and COFINA about whether or not certain events of default have occurred.

To date, only bonds with monthly interest payments have been affected; certain bonds have principal payments due on Aug. 1, Fitch said.

The commonwealth's Issuer Default Rating (IDR) remains RD, indicating that the issuer has defaulted on a select class of its debt, the agency said. Ratings on securities that have not defaulted remain at C Rating Watch Negative.

The ratings on the bonds have reached the lowest level on Fitch's rating scale. Fitch expects to reexamine the commonwealth's credit profile once debt restructuring plans become clear.

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