May 29 Moody's Investors Service said on
Wednesday it may reduce its A2 rating on $86.1 million worth of
Puerto Rico Highways Authority GARVEE bonds because the
Caribbean island tapped a reserve fund to pay debt service on
Puerto Rico, a large issuer of municipal bonds, drew on the
reserve fund after the U.S. Treasury withheld federal highway
grant payments that backed the GARVEES, or grant anticipation
"The bonds are on review for possible downgrade due to the
need to evaluate the debt service notification and payment
procedures on the grant anticipation revenue bonds at PRHTA in
coordination with the Commonwealth of Puerto Rico," Moody's
Puerto Rico officials took money on March 19 from a debt
service reserve fund to make GARVEE payments but has since
replaced the funds with earnings from another fund. The reserve
is now fully funded, the Wall Street ratings agency said.
Moody's said the federal government held back the GARVEE
payments to offset money the commonwealth owed the U.S. Army
Corps of Engineers. Negotiations in the dispute are underway,
Moody's said in a news release.
"Moody's expects to evaluate the commonwealth's plan to
remediate the potential for future late debt service payments in
case of future interceptions. We expect to conclude the review
within 90 days," it said.