Moody's Investors Service said it has upgraded to Baa1 from Baa2 the rating on the Puerto Rico Industrial Development Company's general purpose revenue bonds and changed the outlook to stable.
The Baa1 rating reflects a pledged revenue stream derived from rentals of industrial space leased to a diverse group of industrial firms that has declined steadily during the economic recession, but still provides satisfactory coverage of debt service on a current and projected basis and the company's importance as a major economic development entity of the commonwealth of Puerto Rico government, and its dominant position on the island - with almost 24 million square feet under management in the industrial property market.
The upgrade reflects the fact that PRIDCO's management team has managed to keep revenue and debt service coverage relatively stable during one of the worst economic downturns in the commonwealth's history and recently called some near-term debt, bolstering coverage.
While the commonwealth's economy remains sluggish and PRIDCO is not immune to pressures in the industrial sector, its declining debt service after fiscal 2016 will also aid coverage assuming no issuance of additional debt.
PRIDCO's Baa1 rating is independent of the commonwealth's general obligation rating (Baa1/negative), and while PRIDCO and the commonwealth GO rating could both be influenced by changes in the island's economy, the ratings may not move in tandem.