NEW YORK (MarketWatch) -- Puerto Rico bonds backed by the commonwealth's taxing power were cut three notches to B2 from Ba2 by Moody's Investors Service on Tuesday. The downgrade of its general obligation debt, which leaves the bonds five notches below investment grade, reflects the enactment of a new law that allows the struggling island's public corporations to restructure their bonds. "By providing for defaults by certain issuers that the central government has long supported, Puerto Rico's new law marks the end of the commonwealth's long history of taking actions needed to support its debt," said the Moody's analysts, led by Edward Hampton. Bonds backed by the island's sales-tax revenue were also cut. Puerto Rico passed the restructuring law last week, resulting in immediate downgrades to its agency debt from all three major rating services. Moody's took additional action on the sale-tax debt and general obligation bonds because it said the new law impacts all Puerto Rico bonds, beyond those referenced in the law. The law's passage has put investors on edge about a potential default, sending prices on the agency-backed debt sharply lower. Puerto Rico lost its investment-grade rating from all three rating agencies in February.