Fitch Ratings said it has downgraded the commonwealth of Puerto Rico's long-term issuer default rating (IDR) to RD from C and general obligation bond rating to D from C following the payment default on certain GO bonds on July 1.
Both ratings are removed from Rating Watch. Ratings on securities that have not defaulted will
remain at C until the point of default. The ratings on non-defaulted bonds remain on Rating Watch
Negative.
On July 1, the commonwealth failed to make a $779 million payment of GO debt service and defaulted on $294.3 million in debt service payments not rated by Fitch. As a result, the rating on the GO bonds was downgraded to D from C while the IDR was downgraded to RD from C; the latter indicating that the issuer has defaulted on a select class of its debt.
Failure to meet debt service obligations as scheduled or execution of a distressed debt exchange, where creditors are offered securities with diminished structural or economic terms as compared to existing bonds to avoid a probable payment default would result in a downgrade of the related issuer's IDR to RD and any affected securities to D, Fitch said. Securities that continue to perform will have ratings maintained at C.
