May 15 Puerto Rico's recently enacted changes to
a badly under funded pensions system for government workers is
"credit positive" for the heavily indebted Caribbean island,
Moody's Investors Service said on Wednesday.
Moody's, which rates Puerto Rico's debt at the lowest
investment-grade level of Baa3, also said in a research note an
expansion of a sales tax under consideration by legislators
would be a "credit positive," if enacted, for both the
commonwealth and its Puerto Rico Sales Tax Financing Authority.
Noting policymakers still needed to make changes at Puerto
Rico's "strained retirement plan" for teachers, Moody's said,
the reduced benefits and other reforms at the Employee
Retirement System were "positive for the commonwealth, which
faced rapidly approaching illiquidity of the retirement system
Puerto Rico and one of its biggest debt issuers would
benefit if legislators approve the sales-tax expansion contained
in Governor Alejandro Garcia Padilla's proposed fiscal 2014
"If it passes, it will be positive for both the commonwealth
and the Puerto Rico Sales Tax Financing Authority (known by its
Spanish acronym COFINA), although uncertainty will remain
regarding the forecasted incremental revenue to be raised,"
Moody's also said the governor's $9.8 billion budget plan,
which includes debt restructuring and deficit financing of $775
million, had elements that "may prove politically challenging,
and what form the final budget will take after legislative
debates is uncertain."