Hurricane Maria’s damage to Puerto Rico reduces what people should expect for bond recoveries, Moody’s Investors Service said.

The rating agency downgraded $31 billion in Puerto Rico public sector bonds Wednesday afternoon. Four bond types totaling $29 billion were downgraded to Ca from Caa3. Five other bond types were downgraded to C from Ca. It has a negative outlook on all the ratings.

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Moody’s projects recovery rates of 65% to 80% for Caa3 bonds, 35% to 65% for Ca rated bonds, and 0% to 35% for C rated bonds.

Moody’s dropped from Caa3 to Ca the general obligation, Puerto Rico guaranteed, Puerto Rico Sales Tax Finance Corp. (COFINA) Senior, and Puerto Rico Aqueduct and Sewer Authority bonds. It dropped from Ca to C the Puerto Rico Industrial Development Co., Municipal Finance Agency, Highways and Transportation Authority 1968 Resolution, University of Puerto Rico System Revenue, and University of Puerto Rico Facilities Revenue bonds.

“The lower ratings are aligned with our estimates of Puerto Rico’s reduced debt servicing capacity given extensive damage from Hurricane Maria,” said six Moody’s analysts in “Update: Moody’s Downgrades Puerto Rico GOs, COFINA and Other Debt After Hurricane Maria; Outlook Negative.”

“Puerto Rico faces almost total economic and revenue disruption in the near term and diminished output and revenue probably through the end of the current fiscal year and maybe well into the next.” Puerto Rico’s current fiscal year ends June 30, 2018.

“The weaker trajectory will undercut the government’s ability to repay its debt, a matter now being weighed in a bankruptcy-like proceeding authorized by the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA)," the analysts wrote. "For the University of Puerto Rico, the downgrade factors in expected pressure on enrollment-linked revenue and on funding from the Puerto Rican government.”

The analysts also said, “recovery and rebuilding efforts often propel economic growth. Nevertheless, we expect that any revised fiscal plan will, on balance, incorporate a loss of economic output for a substantial period after Hurricane Maria.”

The Puerto Rico Oversight Board’s fiscal plan for Puerto Rico is meant to, among other things, dictate how much money is to be available for the payment of debt service. The board adopted it in March but has the power to revise it.

Of the downgraded bonds, the PRASA, MFA, and UPR bonds have yet to have monetary defaults. PRASA has defaulted on debt owed to the federal government, which has granted the authority forbearances.

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