SAN FRANCISCO, Dec 14 (Reuters) - A day after downgrading Puerto Rico, Moody’s Investors Service downgraded on Friday $599 million in rated outstanding University of Puerto Rico bonds by two notches to speculative grade ratings, citing “extraordinarily high reliance on the commonwealth for operating revenue.”
Moody’s also said in a statement that its downgrade also reflects the university’s dependence on Puerto Rico’s Government Development Bank for operating lines for liquidity.
The ratings agency added that university “has limited ability to grow revenue, given resistance to raising tuition as well as economic challenges that limit families’ ability to pay higher costs.”
Moody’s downgraded the University of Puerto Rico’s University System Revenue Bonds and Pledged Revenue Bonds to ‘Ba1’ from ‘Baa2’ and Educational Facilities Revenue Bonds, 2000 Series A issued through AFICA to ‘Ba2’ from ‘Baa3.’ The ratings remain under review for further possible downgrade.
Moody’s on Thursday cut Puerto Rico’s credit rating by two notches to ‘Baa3,’ just slightly above non-investment grade, with a negative outlook.
The decision affects $38 billion of outstanding debt and is linked to the U.S. commonwealth’s weak economic outlook and to the lack of meaningful pension reforms, the ratings agency said.