TEXT-S&P: election could prove critical to Puerto Rican credit

Fri Nov 9, 2012 10:42am EST

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Nov 9 - Standard & Poor's Ratings Services said today that the election on
Nov. 6 of Alejandro Garcia Padilla as the Commonwealth of Puerto Rico's new
governor has no immediate impact on its ratings on the commonwealth's general
obligation (BBB/Negative) and appropriation (BBB-/Negative) debt ratings or
other related obligors (see list below). However, we still believe that there is
at least a one in three chance that we may lower these ratings later this year
or in early 2013.

In the case of Puerto Rico, we will analyze the fiscal and economic policy 
choices over the next few months of both the current administration and the 
governor-elect, as well as the new legislature. Our current ratings are 
predicated on the assumption that commonwealth officials will remain committed 
not only to the maintenance of fiscal discipline, but also to the adoption of 
swift and comprehensive fiscal measures, particularly as it relates to the 
commonwealth's $24 billion unfunded pension liability.  

We believe that the governor-elect's electoral platform and public statements 
with regard to the commonwealth's unfunded pension liabilities could result in 
prolonged inaction on pension reform or the adoption of a diluted pension 
reform package that provides only temporary relief to the pension system. 
Either of these two potential outcomes (delayed or insufficient action to 
adopt a pension reform package) would result in a one-notch downgrade to our 
ratings in the next few months, with the potential for additional 
deterioration within the next year, particularly if the economy continues to 
grow at a relatively slow pace, or the commonwealth's liquidity and market 
access is compromised.   

RELATED OBLIGORS
     -- Commonwealth of Puerto Rico, General Obligation (BBB/Negative)
     -- Government Development Bank for Puerto Rico (BBB/Negative/A-2)
     -- Puerto Rico Public Buildings Authority (BBB-/Negative)
     -- Puerto Rico Public Finance Corp. (BBB-/Negative)
     -- Puerto Rico Employees Retirement System (BBB-/Negative)
     -- Puerto Rico Municipal Financing Agency (BBB-/Negative)
     -- Puerto Rico Industrial Development Co. (BBB-/Negative)
     -- Puerto Rico Industrial, Tourist, Educational, Medical, and 
Environmental Control Facilities Financing Authority (BBB-/Negative)
     -- Puerto Rico Aqueduct & Sewer Authority (BBB-/Negative)
     -- Puerto Rico Infrastructure Financing Authority (BBB+/Stable)
     -- Puerto Rico Convention Center District Authority (BBB+/Stable)

Standard & Poor's, a part of The McGraw-Hill Companies (NYSE:MHP), is the 
world's foremost provider of credit ratings. With offices in 23 countries, 
Standard & Poor's is an important part of the world's financial infrastructure 
and has played a leading role for 150 years in providing investors with 
information and independent benchmarks for their investment and financial 
decisions.(New York Ratings Team)
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