Fitch: Puerto Rico Plan Next Step Towards Restructuring

NEW YORK--(BUSINESS WIRE)-- The Puerto Rico Fiscal and Economic Growth Plan (FEGP) released yesterday is another indication that the commonwealth plans to broadly restructure its debt, and all of its credits are at risk of restructuring. The government's direction and interactions with debtholders are highly dynamic, limiting the predictability of outcomes. The rating for all of the commonwealth debt rated by Fitch is 'CC', Rating Watch Negative, which indicates Fitch's view that default of some kind appears probable.

As the commonwealth's restructuring plans become clearer, Fitch expects to downgrade to 'C' on a security-specific basis at the point that default pursuant to Fitch's rating definitions appears to be inevitable. Fitch's public finance ratings do not address the loss given default of the rated liability.

The FEGP is the product of a working group that Puerto Rico's governor created this summer after he declared that the commonwealth's debt is unpayable in aggregate, without distinguishing among its numerous securities. The FEGP recommends that the commonwealth's advisors begin work on a voluntary exchange offer to its various creditors.

Reducing the commonwealth's debt burden is one of the stated key objectives of the FEGP. The working group has drafted legislation that would require the commonwealth to submit a consolidated five-year FEGP by the end of the second quarter of fiscal 2016 to a new control board that would be created by the same legislation. Beyond debt restructuring, a significant number of the working group's proposals rely on action by the federal government. In our view, political challenges to action at the federal level and in the commonwealth's Legislature are likely and the outcome is uncertain.

Following is the list of commonwealth credits rated by Fitch, all at 'CC' Rating Watch Negative:

- Commonwealth of Puerto Rico GO and GO-guaranteed bonds;

- Puerto Rico Sales Tax Financing Corporation (COFINA) senior and subordinate lien sales tax revenue bonds;

- Employees Retirement System of the Commonwealth of Puerto Rico (ERS) pension funding bonds;

- Puerto Rico Aqueduct and Sewer Authority (PRASA) senior lien revenue bonds;

- Puerto Rico Electric Power Authority (PREPA) power revenue bonds.

Related Research: 'Fitch Downgrades Puerto Rico's GO and Related Ratings to 'CC'; Maintains Rating Watch Negative' Click here to view.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150911005484/en/

Fitch Ratings
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Source: Fitch Ratings

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