UPDATE 2-Puerto Rico seeks to reassure markets on $70 bln debt
(Adds Pedro Pierluisi comment, details of ratings action)
By Edward Krudy
July 10 (Reuters) - Puerto Rico's willingness and ability to honor its debts "should be unquestioned," high-ranking commonwealth officials said on Thursday, the latest attempt to convince markets that the island is not about to default on $70 billion of debt.
Investors have reacted badly to a new law that allows the U.S. commonwealth's public corporations, such as the electric power authority (PREPA), to restructure debt, potentially forcing large losses on bond holders. Ratings agencies have slashed the island's debt ratings, sparking a market sell-off.
Commonwealth officials, who were hoping to isolate public corporation debt of around $20 billion, have struggled to convince investors that the island's general obligation and tax revenue, or COFINA, bonds are sound. Thursday's statement sought to reinforce that point.
"Puerto Rico has repeatedly delivered on its credit promises, and the willingness and ability of the Commonwealth to honor its obligations should be unquestioned in light of its actions over the last 18 months," David Chafey, chairman of the Government Development Bank, and Treasury Secretary Melba Acosta Febo said in the joint statement.
The statement comes a day after Standard & Poor's slashed its rating on PREPA's debt four notches to 'B-', a highly speculative rating. At the same time, Fitch cut its ratings on a range of Puerto Rico debt, including GO and COFINA bonds.
Puerto Rico's debt has stabilized after the recent sell-off. Benchmark general obligation bonds with a maturity of 2035 and a coupon of 8 percent rose to trade at an average price of 84.564 cents, with a yield of 9.74 percent.
If island officials are unable to persuade markets that restructuring will only affect corporations, it may lose market access and have trouble refinancing debt in 2015. Continuación...