San Juan lands its second investment-grade rating in a week — Moody’s first-ever grade on the capital follows Fitch’s BBB+ days earlier.
Moody’s Ratings on Tuesday assigned an initial issuer rating of Baa3 to the Municipality of San Juan and gave that same grade, Baa3, to the $124.8 million 2026 General Obligation (GO) bonds the capital plans to place in the market. The outlook is stable. The action comes just five days after Fitch Ratings assigned the municipality a BBB+ rating, also with a stable outlook, marking the first time since 2014 that a Puerto Rico public debt issuer has received investment grade from Fitch, and the agency’s first positive rating on the island in 12 years.
The two ratings, issued by different agencies within the same week, back the municipality’s first bond issuance in more than a decade. According to local reports, the transaction includes roughly $122 million in new bonds, the refinancing of $207.1 million in existing debt, and $23 million in additional financing through commercial banking — figures that, together with the $124.8 million confirmed by Moody’s for the new GO bonds, outline the overall size of the deal.
The reasoning behind Baa3
In its rationale, Moody’s said the issuer rating incorporates ample liquidity and rebuilt available fund balances, a manageable long-term liability burden and a contained fixed-cost profile, which give the municipality financial flexibility to manage revenue shortfalls or other adverse fiscal outcomes. Those strengths, however, are balanced against a tax base that falls well short of US national norms in full value per capita, resident wealth and property tax collection rates.
The agency noted that a growing tourism sector and ongoing capital investment — including in power generation — will to some degree bolster economic growth that has also lagged the mainland’s. Demographic vulnerabilities also remain substantial: an aging population, low organic growth and a long-running trend of relocations to the mainland US, though out-migration shows signs of moderating. Moody’s warned that, without completion of substantial infrastructure-hardening projects, elevated exposure to physical climate risk will likely threaten the municipality’s long-term prospects. The rating also factors in San Juan’s limited discretion to raise most of its revenue sources.
The Baa3 rating assigned to the GO bonds — equivalent to the issuer rating — is supported by the pledge of San Juan’s unlimited special additional property tax (known by its Spanish acronym, CAE) dedicated to debt service and levied on all taxable property within the municipality’s boundaries, as well as the full faith and credit obligation to pay from other sources.
A stable outlook, and what could move it
The stable outlook is supported by strengthened available fund balances, combined with fiscal monitoring and management practices that, according to Moody’s, should result in an effective and timely response to economic, demographic or environmental factors that pose a risk to the municipality’s tax base or financial plans.
Factors that could lead to an upgrade, per Moody’s:
• Durable strengthening of the local tax base and economic activity, including median household income improvement to a level substantially above 40% of the US, a trend of GDP performance closely aligned with the nation’s, or a sizeable full value per capita increase.
• Continuation of operating surpluses that drives further build-up of available fund balance and liquidity.
• Demonstrated reduction in environmental risk exposure through successful execution and operation of major flood mitigation, energy resilience, and related capital investments.
On the other side, the rating could face a downgrade if:
• There is deterioration in available fund balance or liquidity, including a return to operating deficits or material reliance on non-recurring measures to achieve budgetary balance.
• Any governmental authority takes action — such as a proposed tax base reduction to exclude business inventory — likely to cause a 10% reduction in property taxes dedicated to San Juan’s bonds, without offsetting measures.
• Bonded debt increases greatly raise the leverage ratio (to more than 275% of revenue) or the fixed-cost burden (to greater than 20% of revenue).
San Juan’s profile
San Juan is the capital of the Commonwealth of Puerto Rico and the largest of Puerto Rico’s 78 municipalities by population; its estimated 329,737 residents as of 2025 accounted for about 10% of the commonwealth’s total. Real GDP for San Juan’s metropolitan statistical area — which includes the adjacent municipalities of Bayamón and Caguas — was estimated at $76 billion as of 2025, based on data from Moody’s Analytics. San Juan is located on Puerto Rico’s Atlantic coast in the northeastern portion of the island, encompassing the island’s main cargo and cruise ship ports, and is adjacent to Luis Muñoz Marín International Airport, supporting its role as the main economic and touristic hub.
The Fitch backstory: the first green light in 12 years
Moody’s rating comes just a week after Fitch Ratings gave San Juan a BBB+ rating — investment grade — with a stable outlook, as Caribbean Business reported on July 9. The news carried particular symbolic weight: Fitch had withdrawn its ratings on Puerto Rico’s public-sector credit four years earlier, amid the island’s fiscal crisis, and this was the first positive rating the agency has issued on Puerto Rico in 12 years. San Juan also became the first Puerto Rico public debt issuer to receive an investment-grade rating since 2014.
Mayor Miguel Romero attributed the result to the municipality’s fiscal management and said the stable outlook reflects confidence in its financial capacity. “This is a very conservatively structured issuance. We are not going to the max of our financing capacity,” Romero said, according to NotiUno radio station. The mayor said the transaction will allow the municipality to reduce its financing costs.
Taken together, the two ratings — Fitch’s BBB+ and Moody’s Baa3 — place San Juan within investment grade on both scales, though not at the same rung: Baa3 is the lowest investment-grade notch on Moody’s scale, roughly equivalent to BBB- on Fitch’s scale — three notches below the BBB+ Fitch assigned. That gap isn’t unusual when two agencies rate an issuer for the first time — and here both agree on the stable outlook and the same underlying themes: rebuilt liquidity and fiscal discipline, set against a weak tax base, demographic vulnerabilities and climate risk — but it marks a somewhat more cautious starting point from Moody’s, in what is, with this action, its first rating ever issued on the municipality.
For San Juan, the net result is the same: access to capital markets on investment-grade terms for the first time in more than a decade, a milestone the municipality and investors alike will be watching closely as the 2026 GO bond placement moves forward.
