KBRA Releases Comment – Puerto Rico Restructuring: An Ongoing Legacy of Injecting Uncertainty Into the Municipal Market
February 20 2020 - 5:23PM
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.
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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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Analytical:
Paul Kwiatkoski, Managing Director (646) 731-2387
pkwiatkoski@kbra.com
Peter Giacone, Senior Director (646) 731-2407
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Jack Morrison, Associate Director (646) 731-2410
jmorrison@kbra.com
Karen Daly, Senior Managing Director (646) 731-2347
kdaly@kbra.com
Business Development:
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Dana Bunting, Senior Managing Director (646) 731-2419
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