Standard & Poor's downgraded the Puerto Rico Electric Power Authority to CCC-minus from CCC, saying that a default seemed inevitable within six months.
S&P analyst Jeffrey Panger said in a report Friday that the rating agency was concerned by PREPA's repeated draws on its debt service reserve. PREPA withdrew $42 million in July 2014, $9 million in October 2014, and $9 million in April of this year.
"We believe a default, distressed exchange, or redemption appears to be inevitable within six months, absent unexpected significantly favorable changes in the authority's circumstances," Panger wrote.
Panger also said that the authority had a structural shortfall of revenues compared to expenses and a questionable access to the capital markets.
Finally, it is unclear if PREPA could draw on the $236 million it has on deposit at the Government Development Bank for Puerto Rico, S&P said..
PREPA has $8.3 billion in bonds outstanding. Additional debt brings its debt total to over $9 billion.
Moody's Investors Service and Fitch Ratings have said a PREPA default is likely.
