Moody's cuts Puerto Rico to junk

Moody's, which placed Puerto Rico's rating on notice for a downgrade late last year, said it now rates the commonwealth's general obligation bonds at Ba2, two notches below investment grade status.

With some $70 billion of tax-free debt, Puerto Rico has long struggled with recession and has for months been under threat of a ratings downgrade to junk-bond territory by all three U.S. credit ratings agencies. Standard & Poor's cut the island's rating to junk on Tuesday.

Moody's said Puerto Rico's economic malaise, underfunded pension obligations and high deficit "have now put the commonwealth in a position where its debt load and fixed costs are high, its liquidity is narrow, and its market access has become constrained."

Moody's also cut its ratings on the island's sales-tax supported senior lien COFINA bonds to Baa1 from A2.

(Reporting By Steven C. Johnson; Editing by Chizu Nomiyama)