Moody's cuts Puerto Rico to junk, puts bond deal in spotlight


Moody's becomes the second rating agency this week to downgrade Puerto Rico’s credit rating to junk status, after Standard & Poor’s did so earlier this week.

Moody's says Puerto Rico's economic malaise, underfunded pension obligations and high deficit "have now put the commonwealth in a position where its debt load and fixed costs are high, its liquidity is narrow, and its market access has become constrained."

The Moody’s downgrade pertains mostly to the GO bonds, which effectively triggers downgrades on all subsequent notes and bonds.

At issue now is whether Puerto Rico can sell the debt needed to manage its short-term finances and lay groundwork for the government's plan for economic recovery.

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