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RATING NEWS: MOODY'S CONFIRMS Baa1 RATING FOR PUERTO RICO HIGHWAYS.

NEW YORK--(BUSINESS WIRE)--March 8, 1996--Moody's Investors Service has confirmed the Baa1 rating assigned to highway revenue bonds of the Puerto Rico Highway and Transportation Authority.

The Authoritiy plans to offer $834 milliion of Series Y bonds the week of March 11.

The Authority is the Commonwealth's financing vehicle for its transportation capital program. Bonds now offered, issued on a parity with outstanding highway revenue bonds under a 1968 resolution, are secured by a pledge of highway-related revenues which include gas taxes, expressway tolls, investment income and motor vehicle license fees.

The tax pledge is subject to a constitutional first pledge of all Commonwealth taxes to general obligation debt service, if necessary. The medium grade rating now confirmed reflects the following factors:

Satisfactory Financial Performance

Despite growing debt service, the Authority's financial performance has been satisfactory. Total pledged revenues have grown steadily over the last ten years, increasing about 6.3% per year.

Debt Service Coverage Adequate but Declining

Growth of debt service expense has dwarfed revenue gains as the Authority has pursued an aggressive capital plan. Coverage of debt service by revenues has been reduced, but remains adequate.

Extensive Capital Plan Reliant on External Borrowing

The Authority's five-year $2.9 billion capital plan expands on its $1.9 billion plan of 1991-95 and is heavily reliant on external financing. It includes a costly urban rail project; these often cost more than original estimates, for both construction and operations. Bonded indebtedness will more than double by fiscal year 2000.

Financial Projections not Unreasonable but there is Economic Uncertainty Revenue growth projections of 3.7% per year are below historic rates and appear reasonable. A full one-third of revenues comes from tolls, which are economically vulnerable. And proposed tax code changes may slow the economy, reducing pledged revenues.

Maintenance of Projected Coverage Levels is Essential

Should pledged revenues fail to meet projections, an adjustment to the Authority's revenue structure or its ambitious capital plan would be necessary to maintain credit standing.

CONTACT: Moody's Investor Service, New York

Robert J. Miller, Assistant VP, 212/553-4947 or

Steven Hochman, VP/Assistant Director, 212/553-0338
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Publication:Business Wire
Date:Mar 8, 1996
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