Standard & Poor's on Tuesday cut its credit rating on Puerto Rico, dropping the cash-strapped U.S. territory's debt to junk-bond status on concerns about its ability to access capital markets.
S&P, which had placed Puerto Rico's rating on notice for a downgrade last month, said it now rates the commonwealth at "BB+," or one level below investment grade. It had previously rated it "BBB-."
With some $70 billion of tax-free debt, Puerto Rico has a long soured economy and has for months been under threat of a ratings downgrade to junk-bond territory by all three U.S. credit ratings agencies.
Moody's and Fitch Ratings have not announced ratings decisions.
S&P said it worried that Puerto Rico, a Caribbean island with 3.62 million people, has limited ability to sell more debt in the U.S.'s $3.7 trillion municipal bond market and faced possible cash shortages.
"We believe these liquidity constraints do not warrant an investment-grade rating," S&P said in a commentary.
S&P, which also cut its rating on the island's fiscal agent, the Government Development Bank, to BB, said that all of its revised Puerto Rico ratings remain on negative watch.
(Reporting by Dan Burns, editing by G Crosse)