Standard & Poor's downgraded the Government Development Bank of Puerto Rico's long-term issuer credit rating to BB-minus from BB.
S&P analysts Sunsierre Newsome and E. Robert Hansen cited the recently adopted public corporation debt restructuring law for the downgrade. The law "could lead to a potential shift in the commonwealth's historically strong willingness to continue to meet its obligations to bondholders," they wrote July 11.
The GDB has exposure to the Puerto Rico Highways and Transportation Authority, Puerto Rico Electric Power Authority, and one other Puerto Rico public corporation.
The GDB's biggest exposure by far is to the PRHTA — the authority owed the bank $2 billion as of June 30, 2013.
The analyst say this is a significant exposure since the GDB's equity capital is about $2.4 billion. If the PRHTA restructured its debt, this could lead the GDB to material losses.
S&P also downgraded the GDB's short-term issuer credit rating to B.
The rating agency has a negative outlook on the ratings, which reflects the possibility that one or more public corporations may restructure their debt and how this restructuring might affect the GDB.
Moody's Investors Service rates the GDB B3. Fitch Ratings does not rate the debt of the GDB.
