Fitch Ratings yesterday released its recalibrated rating of BBB-plus on Puerto Rico Aqueduct and Sewer Authority bonds that are backed by the commonwealth’s guarantee, two notches above the previous rating.
The rating change from BBB-minus relates to PRASA’s Series 2008A and Series 2008B revenue refunding bonds for $284.7 million. The outlook is stable.
In addition, Fitch also announced its recalibrated rating of AA-minus on Puerto Rico Sales Tax Financing Corp. senior-lien bonds. The previous rating was A-plus. The sales tax bonds are known as COFINA bonds by its Spanish acronym. Fitch’s recalibrated rating for COFINA subordinate bonds is A-plus, compared to the previous A rating.
COFINA has $5.2 billion of outstanding senior-lien bonds and $7.3 billion of outstanding subordinate debt, according to the official statement for its Series 2010A bonds that sold on Jan 27.
Fitch and Moody’s Investors Service are reassessing their public finance ratings to grade municipal debt as they would corporate debt. Standard & Poor’s has said it already rates its public finance debt on a uniform rating scale across all major credit sectors.
Fitch does not rate Puerto Rico’s general obligation debt, but the commonwealth-backed PRASA bonds are the closest estimate of how Fitch would rate the island’s GO credit.
“I think it is an indication of how we look at the commonwealth,” said Fitch analyst Karen Krop.
Standard & Poor’s and Moody’s assign their BBB-minus and Baa3 ratings, respectively, to Puerto Rico’s approximately $9 billion of outstanding GOs.
In addition to the commonwealth-backed PRASA bonds, Fitch assigns its recalibrated rating of BBB-plus on the authority’s revenue bonds that are not secured by the commonwealth’s guarantee, compared to the previous BBB-minus.
PRASA has $2.6 billion of total outstanding bonds, as of June 30, 2009, according to its audited financial statement for fiscal 2009.
In looking at Puerto Rico’s taxable pension bonds, Fitch’s recalibrated rating on the credit is BBB-plus, compared to its earlier rating of BBB-minus.