Puerto Rico Downgraded To Junk Status by S&P Rating Agency

Puerto Rico just got its latest credit rating from ratings agency Standard & Poor, S&P — a junk rating!

On Tuesday, S&P cut its credit rating on Puerto Rico, dropping the cash-strapped U.S. territory’s debt to junk-bond status at BB+ on concerns about its ability to access capital markets.

Via ABC News:

The announcement comes as the U.S. territory prepares to return to the bond market this month, and S&P said the downgrade would have been more severe without recent reductions in the Puerto Rican government’s budget deficit and its overhaul of strained public pension systems.

Eduardo Bhatia, president of Puerto Rico’s senate, expressed anger at S&P and questioned how a credit agency that he said supported a move by the previous Puerto Rico administration to borrow $16 billion now decided to downgrade the island’s debt.

“Today, it turns around and stabs us in the back,” he said. “For the past year, we’ve met their demands and our people have made great sacrifices to improve the fiscal situation and honor all that debt they endorsed.”

Economists say years of deficits under previous Puerto Rican administrations led to the majority of the government’s outstanding $70 billion debt.

S&P’s announcement worried many in Puerto Rico, which has entered its eighth year in recession while struggling with $70 billion in public debt and a 15.4 percent unemployment rate, higher than any U.S. state.

Garcia and other top officials sought to assure Puerto Ricans and bondholders that they would continue to whittle down the debt and present a deficit-free budget next fiscal year.

“Decades of fiscal irresponsibility cannot be turned around in 12 months,” Garcia said. “But the truth is, we did everything we could to turn it around in 12 months. My administration is not to blame for this downgrade, but I will take responsibility to pull the island out of it.”

He assured Puerto Ricans that the government will be operating as usual and that he will submit legislation on Wednesday to further reduce the deficit this year.