Moody's threatens downgrade of Puerto Rico to junk

|By:, SA News Editor

BTIG's Mark Palmer attempts to put in perspective Moody's threatened downgrade of Puerto Rico's to junk status, saying S&P's decision will be of more importance to MBIA (MBI -1.1%) and Assured Guaranty (AGO +0.1%), and each would face a capital charge of $65M should a downgrade occur - peanuts in terms of their capital levels.

As for Moody's, the agency says a downgrade could occur if Puerto Rico is unable to access capital markets - a concern raised this week when it repaid a $400M loan from Barclays from its own pocket rather than tapping the bond market. Palmer, however, notes Treasury Secretary Melba Acosta today saying the Commonwealth plans to return to the muni bond market in early 2014. Puerto Rico has the liquidity and financial flexibility to wait out the current turbulence in municipals, says Acosta.