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WASHINGTON, June 26 (Reuters) - Moody’s Investors Service cut its rating of Puerto Rico’s power authority to Ba3 from Ba2 on Thursday, becoming the final credit rating agency to downgrade the struggling public corporation on concerns about liquidity.
The cut comes a day after Puerto Rico’s governor unveiled legislation that would allow the territory’s corporations unable to pay their debts to restructure their finances and operations.
Earlier this month, Standard & Poor’s Ratings Services and Fitch Ratings downgraded the Puerto Rico Electric Power Authority, or PREPA, saying expiring lines of credit pose immediate threats to PREPA’s liquidity.
PREPA is currently negotiating to extend the lines of credit, and there is uncertainty if Puerto Rico’s Government Development Bank will step in if those negotiations fail.
“Even if PREPA is able to address its immediate liquidity issues, the company faces continuing challenges over the next several years,” Moody’s said.
Moody’s said the authority also must confront negative cash flow, high electricity rates, high rates of non-payment, and “perceived constraints on raising revenues to fund a sizeable capital spending program needed to convert electricity generation from high-cost oil to lower-cost natural gas.”
The governor, Alejandro Garcia Padilla, has also introduced legislation to authorize a bond sale of $60 million for capital improvement projects. Puerto Rico’s legislative session ends June 30. (Reporting By Lisa Lambert; Editing by David Gregorio)