Moody’s Investors Service said that there’s a high probability that Puerto Rico will default on its general-obligation, sales-tax or Government Development Bank debt during the next two years, Bloomberg News reported yesterday. Revenue shortfalls because of the island’s “sluggish” economic growth and the political risk of potential changes to Puerto Rico’s tax system may cause outcomes unfavorable to bondholders, Ted Hampton, a Moody’s analyst in New York, said in a report yesterday. Those are among pressures that have increased default risk to “a high level during the next two years,” Hampton said. The ratings company also cut Puerto Rico’s ranking two steps to Caa1, seven levels below investment grade, from B2. It dropped its sales-tax debt, called Cofina, to B3 from Ba3. Puerto Rico plans to sell about $2 billion of bonds backed by petroleum-tax revenue.
In related news, the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law will hold a hearing on Feb. 26 at 11:30 a.m. to examine H.R. 870, the "Puerto Rico Chapter 9 Uniformity Act of 2015." The legislation was introduced on Feb. 11 by Resident Commissioner of Puerto Rico Pedro Pierluisi to amend the Bankruptcy Code to include Puerto Rico as a "State" for purposes of who may be a debtor under chapter 9 of the Bankruptcy Code. To read the full text of H.R. 870, please click here.
