* Caribbean island seen facing rising budget imbalances
* Fitch ratings watch negative follows Moody's ratings cut
Feb 21 Fitch Ratings on Thursday placed its
BBB-plus rating for Puerto Rico general obligation bonds and
other debt on a ratings watch negative.
Noting the U.S. commonwealth faced a "significant increase"
in operating budget imbalances, Fitch said in a news release
that it expected to meet soon with government officials and
would resolve in early March the watch status that also affects
Puerto Rico pension bonds and other debt.
A big seller of bonds in America's $3.7 trillion tax-free
market, Puerto Rico pays the highest rates of any big issuer,
partly because of a weak economy, chronic budget deficits and
unfunded pension liabilities of $37.3 billion.
In December, in an action affecting $38 billion of debt,
Moody's Investors Service slashed Puerto Rico's credit rating by
two notches to Baa3, just slightly above non-investment grade,
with a negative outlook.
"The negative rating watch is based on the economic and
revenue underperformance which Fitch believes has meaningfully
increased the size of the operating imbalance for the current
fiscal year and the gap the commonwealth will need to address as
it develops a budget for 2014," the credit agency said.
"Fitch does not believe that a balanced budget will be
achieved in fiscal 2014, and meeting this goal will remain
The ratings watch covers Puerto Rico's GO bonds; Puerto Rico
Building Authority government facilities revenue bonds backed
by the commonwealth; Puerto Rico Aqueduct and Sewer Authority
commonwealth guaranty revenue bonds; and Employees Retirement
System of the Commonwealth of Puerto Rico pension funding bonds.