S&P Global Ratings said it lowered its issuer credit rating on the senior unsecured debt of the Government Development Bank for Puerto Rico (GDB) to D (default) from CC.
At the same time, it affirmed its SD long-term issuer credit rating on the bank. The rating actions follow the announcement on May 1 that Puerto Rico's Governor Alejandro Garcia Padilla imposed a moratorium on the payment of all of GDB's funded debt that is payable during the emergency period. Last month, the governor had announced the emergency period on GDB and froze most deposit withdrawals.
Of the $423 million in principal and interest that was due on May 2, the bank paid the entire $23 million in interest due, privately exchanged approximately $33 million of debt owed to various state-chartered credit unions in Puerto Rico, and defaulted on the remaining principal due (approximately $370 million).
In addition, the bank confirmed that it has negotiated a framework with a group of creditors to potentially restructure and exchange about $900 million of notes at a 53% haircut. However, the execution of any such proposed restructuring would be difficult and would require participation of 100% of GDB's outstanding noteholders. S&P considers this to be a distressed exchange.
Its rating on GDB's other senior unsecured debt reflects the opinion that a default on subsequent debt maturities is virtually certain. It would lower the ratings on GDB's debt issues to D upon an actual default of principal or interest payment on the respective scheduled due dates.
