Standard & Poor's Ratings Services said its CCC-minus ratings on Puerto Rico Aqueduct & Sewer Authority's senior-lien revenue bonds and commonwealth-supported debt remain on CreditWatch with negative implications.
"Our position is based on the likelihood that the Commonwealth of Puerto Rico could default on its obligations, and the uncertainty as to whether PRASA will continue to remain insulated from such events as it has thus far," said Standard & Poor's credit analyst Theodore Chapman.
PRASA's recent disclosure of prioritizing its senior-lien (gross pledge) revenue bonds and aging accounts payable over debt to which its net revenues are pledged--but backstopped by the commonwealth--also lends itself to the uncertainty, the rating agency said.
The revenue bonds are higher in priority in the flow of funds, but by practice PRASA has been self-supporting all its financial obligations since implementing a very large rate increase in 2013.
It has been represented to Standard & Poor's that a selective default on the commonwealth-backstopped obligations would not constitute a default under the 2008 master agreement of trust (MAT).
