Fitch: Puerto Rico's $3.5B GO Sale Provides Breathing Room

NEW YORK--()--Fitch Ratings' 'BB' rating on the commonwealth of Puerto Rico's general obligation (GO) bonds assumed that the commonwealth would be able to execute a sizable transaction in the near term to bolster liquidity. Yesterday's offering, in which the commonwealth sold $3.5 billion in GO bonds with a 2035 maturity, is consistent with that assumption, and demonstrates the ability of the commonwealth to access the market. Notably, the commonwealth was able to sell the full amount authorized.

Fitch believes that the successful execution of this transaction provides the commonwealth breathing room as it continues to address ongoing economic and fiscal challenges. The sale, the vast majority of which replaces existing debt rather than adding to the commonwealth's debt load, will improve liquidity at the Government Development Bank for Puerto Rico and remove potential near-term liquidity stresses.

Fitch's 'BB' rating on the commonwealth's GO bonds reflects demonstrated weakness in the Puerto Rico economy, very high liabilities including outstanding debt and unfunded pensions, challenged though improving financial operations, and limited financial flexibility. Fitch continues to see the economy as the key to future rating direction, as economic growth will be needed to support the commonwealth's high debt levels and other long-term liabilities, as well as to achieve and maintain a structurally balanced budget.

For further information on Puerto Rico's GO rating, please see Fitch's March 10, 2014 new issue report, available at www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Commonwealth of Puerto Rico New Issue Report' (March 10, 2014);

--'Fitch Downgrades Puerto Rico GO and Related Debt Ratings to 'BB'; Outlook Negative' (Feb. 11, 2014);

--'Tax-Supported Rating Criteria' (Aug. 14, 2012);

--'U.S. State Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. State Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686033

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Contacts

Fitch Ratings, Inc.
Primary Analyst
Laura Porter, +1-212-908-0575
Managing Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Karen Krop, +1-212-908-0661
Senior Director
or
Media Relations
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

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Contacts

Fitch Ratings, Inc.
Primary Analyst
Laura Porter, +1-212-908-0575
Managing Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Karen Krop, +1-212-908-0661
Senior Director
or
Media Relations
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com