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Standard & Poor's downgraded Puerto Rico's credit rating to junk status Tuesday, citing the cash-strapped U.S. territory's limited access to debt markets. The move provoked the governor to address the issue publicly on Twitter as he grapples with the island's estimated $70 billion debt. While Puerto Rico's creditworthiness was lowered only one notch to BB+ from BBB-, some observers believed it could set off a chain reaction of further negative consequences.
A significant portion of the island's debt carries an insurance promise of payment in the event that its bonds are no longer "investment grade." With S&P's downgrade, Puerto Rico is likely to have to make payments on some of its debt, which could in turn worsen the territory's already precarious financial situation, causing further downgrades.
Other ratings agencies like Moody's and debt holders like UBS have yet to follow S&P's lead, but both have issued downgrade threats to Puerto Rico in recent months.
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