Moody's Investors Service said it has downgraded the Puerto Rico Conservation Trust Fund's secured notes to C, with no outlook, from Caa3 with a negative outlook.
The rating action affects $200 million (original issue amount) of Puerto Rico Conservation Trust Fund secured notes. This action follows the May 2 downgrade of the underlying obligor, Doral Financial Corporation, to C from Caa3.
The Puerto Rico Conservation Trust Fund is a conduit issuer, while Doral Financial is the notes' underlying obligor. The trust fund's notes were issued to purchase medium term notes issued by Doral, as a form of Puerto Rico tax-exempt financing for Doral.
Payments from the bank are the only source of repayment on the trust fund's notes. The rating on the trust fund's notes, therefore, does not stem from the credit position of the Commonwealth of Puerto Rico (Ba2, negative). The new rating on Doral Financial, including its notes issued through the trust fund, indicates a high likelihood of default and high loss severity in the event of a default.
