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Are U.S. Territories Now Junk? Puerto Rico Creates Ratings Rift

  • Fitch cuts Guam’s revenue bonds to junk; S&P holds A rating
  • Pacific island struggles with budget deficits, high debt
Pedestrians walk along Calle Fortaleza in Old San Juan, Puerto Rico.
Photographer: Derick E. Hingle/Bloomberg

The U.S. effort to help pull Puerto Rico from a fiscal crisis has two major rating agencies at odds over another U.S. territory’s debt.

Fitch Ratings cut Guam’s business-tax revenue bonds to junk last week, arguing that Puerto Rico’s rescue law, known as Promesa, "fundamentally" alters the premise used to rate debt issued by territorial governments. Even though the act doesn’t apply to the Pacific island 9,300 miles (15,080 kilometers) from Puerto Rico, analysts say it has set a precedent that could let other territories escape from obligations to bondholders.