WASHINGTON: Rating firm Standard & Poor’s said it was prepared to cut Puerto Rico’s credit rating to default as it expects the US territory will fail to make a crucial payment Friday.
Puerto Rico already has missed several payment deadlines. The Caribbean island was expected to default on some $2 billion in debt payments due Friday, despite a rescue plan signed into law Thursday by President Barack Obama.
“Puerto Rico, in our view, will likely default” on the debt payments, the rating firm said in a statement. In that case, S&P said it would declare Puerto Rico in default on Tuesday, the first business day after Monday’s Independence Day holiday.
S&P noted that Puerto Rico’s governor, Garcia Padilla, had signed an executive order on Thursday declaring a debt moratorium.
According to S&P, the territory’s government is due to pay $780 million in capital and interest on general obligation debt. The island’s constitution requires general obligation debt payment to take priority over other spending.
The bipartisan measure that Obama signed into law Thursday allows Puerto Rico to restructure its $70 billion debt, but it does not prevent default.
The Puerto Rico Oversight, Management and Economic Stability Act establishes a financial control board to restore fiscal discipline on the island. It also blocks potential litigation between the island and its creditors.
“The willingness of the PROMESA oversight board to impose a forced debt restructuring, or impose meaningful financial controls, will depend on the makeup of this board, whose members are currently unknown,” S&P said. AFP