Puerto Rico Takes Another Economic Hit, This Time Downgrade To 'Junk' Bond Rating

San Juan, P.R. (EFE) – Ratings agency Standard & Poor's decision to downgrade Puerto Rico's general-obligation bonds to speculative, or junk, status was "unfair," the island's governor said here Tuesday.

"It seems that each time they issued a report saying we had to do something, they didn't believe that we would achieve it, but we did it. So, they issued another raising the bar even more. Up until they noticed that we had done everything and had also reduced the debt,' Gov. Alejandro Garcia Padilla said.

"This is a time for the country to grow. It's an opportunity to begin from zero," he said at a hastily arranged press conference following the announcement from S&P.

"Even though my administration is not responsible for this situation, as governor I take responsibility for getting the (island) out of it," said Garcia Padilla, who took office just over a year ago."

Acknowledging that "these are not going to be easy times," he said that he and his economic team, who joined him in front of reporters, were "committed to taking correct and sensible actions to rebuild Puerto Rico."

The island's treasury secretary, Melba Acosta, recognized that the downgrade is going to move up the obligation to pay part of Puerto Rico's $70 billion debt.

She said, however, that they were preparing "for this scenario."

"It doesn't catch us by surprise," and there are negotiations under way with certain banks to move back those deadlines or offer payment plans, Acosta said.

S&P cut its ranking of Puerto Rico's debt from BBB- to BB+ and suggested further cuts could be forthcoming.

The New York-based agency also scaled back its rating of bonds issued by the Government Development Bank for Puerto Rico by two levels to BB.

"The commonwealth's access to liquidity either through the GDB or other means will remain constrained in the medium term, even in the event of a potential issuance of debt planned next month," S&P analyst David Hitchcock wrote. "These liquidity constraints do not warrant an investment-grade rating."

S&P said it would have downgraded Puerto Rican bonds by two or more steps if not for recent moves by the government in San Juan to slash budget deficits and curb public employee pensions.

The intention announced by the current administration to reduce the deficit for the 2014 fiscal year by $170 million and present a balanced budget for fiscal 2015 could lead to an improvement in its credit rating over the long term, the agency said.

The island is now in the eighth year of recession and has an unemployment rate of more than 15 percent.