S&P Cuts Puerto Rico Credit Rating Further into Junk Status

In February 2014, we blogged about Standard & Poor’s dropping Puerto Rico’s credit rating to junk status. The financial condition of Puerto Rico has gotten even worse since then. As a result, S&P has slashed Puerto Rico’s credit rating even further. Puerto Rico now is rated five tiers below investment grade and S&P signaled that even more downgrades could lie ahead. The recent drop in Puerto Rico’s credit rating could result in even more investment losses for Puerto Rico bond investors who already have suffered significant losses over the last year and a half, including investors in UBS Puerto Rico’s closed-end bond funds.

As bad as Puerto Rico’s economy had been prior to last year’s credit rating drop, Puerto Rico’s economy activity has declined even further and the island continues to suffer from population decline and high debt levels. Puerto Rico’s deep junk status could make a bad situation even worse, as it likely will be even more costly for Puerto Rico to borrow money. To make matters worse, a court recently struck down as illegal Puerto Rico’s attempt to restructure its debt.

DKR represents numerous Puerto Rico residents in FINRA arbitration claims against UBS, Santander, and other banks on the island. Among other things, we have alleged unsuitable investments when brokers failed to diversify our clients’ accounts and recommended and sold over-concentrated positions in Puerto Rico bonds and UBS Puerto Rico bond funds.

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