Fitch Ratings has downgraded the Commonwealth of Puerto Rico's Long-Term Issuer Default Rating (IDR) to 'RD' from 'C' and general obligation (GO) bond rating to 'D' from 'C' following the payment default on certain GO bonds on July 1, 2016. Both ratings are removed from Rating Watch. Ratings on securities that have not defaulted will remain at 'C' until the point of default. The ratings on non-defaulted bonds remain on Rating Watch Negative.
DEFAULT ON GO BONDS: On July 1, 2016, the commonwealth failed to make a $779 million payment of GO debt service and defaulted on $294.3 million in debt service payments not rated by Fitch. As a result, the rating on the GO bonds was downgraded to 'D' from 'C' while the IDR was downgraded to 'RD' from 'C'; the latter indicating that the issuer has defaulted on a select class of its debt.
RATING SENSITIVITIES
NONPAYMENT OR DISTRESSED DEBT EXCHANGE: Failure to meet debt service obligations as scheduled or execution of a distressed debt exchange, where creditors are offered securities with diminished structural or economic terms as compared to existing bonds to avoid a probable payment default would result in a downgrade of the related issuer's IDR to 'RD' and any affected securities to 'D'. Securities that continue to perform will have ratings maintained at 'C'.
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