BOSTON -- Standard & Poor's Corp. said Friday it placed the Puerto Rico Port Authority on CreditWatch with negative implications.
The authority, which maintains an A-minus rating from Standard & Poor's, was placed on CreditWatch because of continued noncompliance with its rate covenant, accounting changes, and the effects of a new Puerto Rico Supreme Court ruling, according to Standard & Poor's officials.
The officials said a new plan formulated by Gov. Pedro Rossello may turn the authority's fortunes around.
"The reason that we did not lower the rating is that the administration and the authority are working together and have a very well thought-out plan to address these problems," said Ernesto Perez, a director at Standard & Poor's. "The governor has declared a state of emergency at the authority and has voiced his support to them."
Perez said that Puerto Rico's dependence on tourism and shipping was a major reason that the government acted so forcefully on the authority's behalf. Although the noncompliance with the rate covenant placed the authority in technical default, Perez and Peter D'Erchia, another director at Standard & Poor's, said there was never a doubt about the authority's ability to provide debt service for its outstanding bonds.
The authority has outstanding $52 million in uninsured debt. Moody's Investors Service rates the debt A.
Under the state of emergency, the authority is not bound by the standard waiting period before it can raise rates. Normally, an entity in Puerto Rico has to announce any increase in rates or fees 30 days before making the increase.
The state of emergency will allow the authority to raise rates on Jan. 1 of next year.
The authority announced it will increase rates for both the maritime and airport divisions. Rates will be reviewed on an annual basis instead of every three years.
Perez said that although rates in some cases will double, rates in Puerto Rico will still be in line with those of other Caribbean islands and of ports on the mainland United States.
The authority and the governor approved a plan last Monday that will see revenues rise 30% from airport rates. New maritime rates, which will go into effect in July of next year, will cause revenues to go up about 23%.
Additionally, Rossello has said that the commonwealth will absorb about $12 million in authority fees.
"We will be looking to make sure that every part of the governor's plan is enacted," Perez said. "Any delay or problem in getting the program through would cause us to review the credit again."
Both Perez and D'Erchia said that although the authority has never had a problem with debt service, a further review of the credit could leave the authority's rating at BBB.
The ratings officials said that a lower rating is not warranted at this time because of Puerto Rico's continued dedication to support the authority's bonds.
