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NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) publishes its Puerto Rico Restructuring: An Ongoing Legacy of Injecting Uncertainty Into the Municipal Market commentary, following the release of the Commonwealth’s amended plan support agreement (PSA) for certain obligations on February 9, 2020.

KBRA’s principal takeaways from this development are as follows:

  • Although the PSA is an important chronological step, the restructuring process is far from complete. Title III proceedings, and related litigation, are unlikely to conclude before 2021 or beyond.
  • The challenge to the validity of certain general obligation bonds and the effort to apply lower recoveries based on this assertion, combined with the erosion of special revenue bond protections, all represent significant negative developments that have already roiled the municipal market. In KBRA’s opinion, a knock-on macro effect emerging from these Title III proceedings is the imposition of rating ceilings by other NRSROs across various municipal asset classes.
  • KBRA now expects less uncertainty to the overall outcome in the Title III proceedings. In KBRA’s view, recent developments suggest that severely negative recovery scenarios seem less likely, which is clearly positive. Further, very favorable bondholder outcomes seem less likely as well.

KBRA continues to monitor events to assess potential impacts on KBRA’s insurance financial strength ratings.

To access the comment, click here.



About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.



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