San Juan, Mar 4 (Entravision) .- Puerto Rico will revert to the debt markets in the coming days to borrow close to 2,900 million dollars, and it will be held for the first time in its history in quality of issuer of bonds “scrap”, after which the governor will sign today the law that allows a new indebtedness.
Alejandro Garcia Padilla proceeded this Tuesday with the signing of a controversial law that will increase the borrowing of the island – which, with its only 3.6 million inhabitants, it has accumulated a debt of more than 70,000 million dollars-, predictably with high interest rates.
In addition, had initially been bandied about that law should stipulate that the future buyers of these bonds could sue the Government Of Puerto Rico in any court in the U.S. , although finally has been limited to the courts of Manhattan.
Also, the text says expressly that these demands must be confined to this issue, as well as the loss of sovereign immunity that supports the law, so that the claims are not may be extended to previous debts.
This new issue, which will invest a maximum of $3,500 million, will enable the company to refinance outstanding credit lines from payment, whose commitments around 2,000 million, and meet the needs of the liquidity of the Government at least until the end of next year.
It is the first issue of the current Executive, which has undertaken a series of reforms at the administrative level and operational and Cuts in public spending to try to clean up the accounts of Puerto Rico.
So, today also approved the reduction of the deficit of the current fiscal year from 245 to 92 million dollars and is intended to the next exercise, for the first time in many years, the budget is balanced and do not need to borrow more.
Even though there are many theories on how Puerto Rico has come to this point, an ever-increasing number of voices that suggest that part of the problem lies in the status of the island, a Free Associated State of the USA.
so, nor is it a more state, with the advantages that this would be especially on social aid, nor is it an independent country that can Play with your monetary policy or to attract foreign capital.
In this regard, the leader of the opposition in Puerto Rico, Pedro Pierluisi, said today that “the time has come to take the steps to complete our union with the US.” and requested to Washington that has “a more active role” to boost the annexation.
“The bond issue proposal will help to support the decisive measures that Puerto Rico has been taken to strengthen its fiscal position”, said for their part, the responsible for Finance, Melba Acosta, and of the Board of Directors of the Government Development Bank, David Chafey.
In a joint statement added that “also provide greater flexibility at the same time as the island continues to pursue its development initiatives Economic and job creation” to try to leave behind the nearly eight years of recession.
but not materialize when the bond issue will take place – Moody’s recently pointed to the March 11 – if confirmed that Barclays, Morgan Stanley and RBC Capital Markets will be the entities expenses incurred.
Now it is a matter of placing on the market a debt that a priori will enjoy a good acceptance, because it is exempt from federal, state and local taxes in the USA.
In addition, it will be expected to provide interests close to 10 per cent to compensate for the risk involved, according to the rating agencies, which last month were placed to Puerto Rico in the speculative grade, and the possibility of a restructuring of debt in the event that Follow the financial situation become more complicated.