Fitch Ratings downgraded Puerto Rico's general obligation debt further into junk territory Monday, citing concerns that the commonwealth will default on its debt. The ratings agency cut the island's GO rating to CC from B and kept it on Rating Watch Negative, which means it could lower it even further in the near term. The downgrade "which indicates Fitch's belief that default of some kind appears probable, is based on public comments by the governor supporting the broad debt restructuring strategy included in an external report released this morning," Fitch said in a statement. Puerto Rico Gov. Alejandro Garcia Padilla told the New York Times on Sunday that the commonwealth cannot pay its roughly $72 billion in debt. In an interview, Padilla said Puerto Rico may seek "significant concessions from as many as all of the island's creditors," including up to five years of deferred payments. In recent months, the Puerto Rico legislature approved a tax increase aimed at balancing its budget, and appears to be in the last stages of negotiating one that would fund debt service and include spending cuts. "Nevertheless, it now seems clear that this provides only minimal comfort that the commonwealth will make full and timely payment on its obligations to bondholders," said Fitch.
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