UPDATE 2-S&P cuts Puerto Rico rating, says default seems inevitable
(Adds background, details on S&P, Moody's and Fitch ratings)
June 30 (Reuters) - Standard & Poor's Ratings Services lowered its credit rating on Puerto Rico to 'CCC-minus' from 'CCC-plus', hours after Governor Alejandro Garcia Padilla said the U.S. territory needed a period of bankruptcy to restructure its debt.
A default, distressed exchange, or redemption of Puerto Rico's debt within the next six months seems inevitable, S&P said in a statement. It put a negative outlook on the rating. (bit.ly/1GLPCyD)
Puerto Rico faces a July 1 deadline to repay $1.055 billion and prepare an annual budget. Earlier Monday, Fitch Ratings downgraded Puerto Rico, while Moody's said its current ratings already allowed for a high probability of default.
Former IMF staffers -- engaged by Government Development Bank, Puerto Rico's financing arm -- issued a damning report on Sunday about the U.S. territory's financial stability.
Garcia Padilla admitted on Monday that Puerto Rico's budget gap was bigger than thought and it could not repay its $73 billion of debt, while a newly appointed adviser to the U.S. territory said it is "insolvent" and will soon run out of cash.
S&P said it placed all of Puerto Rico's debt at the same 'CCC-minus' level, including that for the Municipal Finance Agency and the Employees Retirement System, as all these obligations were potentially at risk of being restructured due to the severity of the territory's fiscal situation.
"We believe the (Puerto Rico) commonwealth's very weak liquidity and difficulty in obtaining external market access for cash flow financing raises the likelihood of a debt restructuring within the next six months," S&P said.
Fitch downgraded Puerto Rico's debt ratings to 'CC' from 'B' with a rating watch negative, saying a default of some kind appeared probable. Continuación...