Moody's Investors Service has placed on review for downgrade the general obligation (G.O.) rating of the Commonwealth of Puerto Rico. At the same time, ratings that are capped by or linked to the commonwealth's G.O. rating were also placed on review, including the Puerto Rico Sales Tax Financing Corporation's (COFINA's) senior and junior lien bonds.

SUMMARY RATING RATIONALE

Downward pressure on the rating arises from reflects the Commonwealth's weakening liquidity, increasing reliance on external short-term debt, and constrained market access, within the context of a weakened and now sluggish economy. These developments exacerbate the longstanding financial strain brought by the commonwealth's very high debt load and pension obligations, as well as its chronic budget deficits.

During the review period, we will focus on the following:

--The ability and willingness of the commonwealth to access the long-term capital markets

--Key economic indicators, including employment data, retail sales and the island's Economic Activity Index (EAI)

--Financial performance in coming months, including key December revenues

--Legislative actions to reform the Teachers' Retirement System (TRS), shore up liquidity, or take any other actions to preserve fiscal stability

--The proposed budget for fiscal year 2015

WHAT COULD MAKE THE RATING GO DOWN

Given the current pressures on the rating, the review is likely to result either in a confirmation of current rating levels or a downgrade. A downgrade would be increasingly likely if the review produced evidence of:

--Failure to access the public debt market with a long-term borrowing

--Declines in liquidity

--Financial underperformance in coming months

--Economic indicators in coming months that point to a further downturn in the economy

--Inability of government to achieve needed reform of TRS.

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