Moody’s hikes Pridco rating, outlook

The Baa1 rating reflects a pledged revenue stream derived from rentals of industrial space leased to a diverse group of industrial firms that has declined steadily during the economic recession, but still provides satisfactory coverage of debt service on a current and projected basis, Moody’s said.

The credit rater also cited Pridco’s importance as a major economic development entity of Puerto Rico government, and its dominant position on the island — with almost 24 million square feet under management in the industrial property market. The industrial promotion agency falls under the Economic Development & Commerce Department umbrella.

“The upgrade reflects the fact that Pridco’s management team has managed to keep revenue and debt service coverage relatively stable during one of the worst economic downturns in the commonwealth’s history and recently called some near-term debt, bolstering coverage,” Moody’s said. “While the commonwealth’s economy remains sluggish and Pridco is not immune to pressures in the industrial sector, its declining debt service after fiscal 2016 will also aid coverage assuming no issuance of additional debt.”

Pridco’s Baa1 rating is independent of the commonwealth’s general obligation rating (Baa1/Negative), and while Pridco and the commonwealth GO rating could both be influenced by changes in the island’s economy, the ratings may not move in tandem.

The rating outlook for Pridco’s general revenue bonds is stable and reflects the strong management of Pridco during the long economic downturn which managed to maintain rental income and debt service coverage despite very challenging economic conditions.

“We expect the credit to remain stable in light of the commonwealth’s modest economic growth forecast and expectation of continued strong management,” Moody’s said.

The rating could be lifted further if there is significant improvement in economic and industrial activity leading to sustainable higher debt service coverage.