It’s strike three for Puerto Rico’s credit rating.
Fitch Ratings on Tuesday joined Moody’s Investors Service and Standard & Poor’s in downgrading the Caribbean island’s credit to junk status.
Fitch lowered the ratings for much of Puerto Rico debt, including its general obligations bonds, to BB from BBB-, according to a statement released by the ratings firm.
Both Moody’s and S&P lowered the boom on the commonwealth last week, citing fears that a long-running recession, high unemployment and high expenses – primarily in the form of skyrocketing pensions costs – has made it difficult for Puerto Rico to tap capital markets to raise money.
Fitch echoed those sentiments on Tuesday, citing the “(challenges) facing the commonwealth in maintaining financial flexibility in light of the deterioration in capital markets access.”
Fitch said the recent downgrades have only exacerbated those issues.
“In the context of other credit challenges related to a weak economy and elevated liability levels, Fitch believes that these additional hurdles preclude the commonwealth maintaining an investment-grade credit profile,” the ratings firm said in the statement.
Puerto Rico is a self-governing commonwealth of about 3.7 million people. The island’s economy has been shrinking in recent years even as government liabilities have increased, primarily pensions for government workers. Unemployment after years of recession hovers at around 15%.
Unlike Detroit, which is a U.S. municipality, Puerto Rico is a territory and does not have the option of filing for a debt restructuring under a bankruptcy filing.