NEW YORK, Aug 1 (Reuters) - A shortfall in tax collections and demands for cash from public corporations could mean Puerto Rico’s Government Development Bank runs out of money sooner than expected, Moody’s Investors Service said on Friday.
Moody’s forecasts that without factoring in payments to public coporations the GDB’s available cash will fall to $212 million, or 2 percent of general fund spending, by March 2015 and be almost entirely depleted by June 30.
The model factors in $478 million loan to the government to make up for a possible tax revenue shortfall of 5 percent. Currently the GDB says it has enough cash through June 30.
Puerto Rico passed a law in June aimed at financially isolating its public corporations from the central government by allowing them to restructure their debt. However, Moody’s believes they could still require cash from the GDB.
“It remains to be seen whether the law will prevent unexpected cash outlays from the Commonwealth to corporations,” Moody’s said in the report.
The electric power authority PREPA is widley expected to use the law, known as the Recovery Act, to restructure over $9 billion in loans. PREPA delayed payments to creditors on Thursday which were due under a $671 million loan facility.
“A more rapid drop in cash balances than Puerto Rico’s fiscal agent anticipates would further pressure the commonwealth’s credit ratings,” Moody’s said in the report.
Moody’s gave Puerto Rico’s general obligation debt a B2 junk rating with a negative outlook after a downgrade in July. (Reporting by Edward Krudy; Editing by Diane Craft)