Bonds

Puerto Rico tries to pave the road to sell new bonds

Puerto Rico’s leader of its debt oversight agency on Monday told high-yield investors that Puerto Rico’s central government was on the way to be able to sell new bonds.

Puerto Rico Fiscal Agency and Financial Advisory Authority Executive Director Omar Marrero made his pitch to participants at the JPMorgan 2021 Global High Yield and Leveraged Finance Conference.

Puerto Rico Fiscal Agency and Financial Advisory Authority Executive Authority said the commonwealth was building “credibility” with bond investors.

Marrero said under the new central government debt deal all claims are reduced by 79%, if one adds the debts of the Employees Retirement System, Convention Center District Authority, Highways and Transportation Authority, and unsecured claims to the commonwealth-guaranteed debt.

“While the ultimate finding of being able to access the capital markets is uncertain yet, the significantly improved balance sheet of the island should facilitate this, which is one of the required milestones under [the Puerto Rico Oversight, Management, and Economic Stability Act], as you know, for the termination of the oversight of Puerto Rico,” Marrero said.

“Not only were we able to gain credibility through restructuring issuers COFINA [Puerto Rico Sales Tax Financing Authority], Puerto Rico Infrastructure Finance Authority Ports … but we were able to gain more credibility when we went back to the market in September and December 2020 with both the Public Housing Administration and the water utility,” Marrero said.

Marrero did not mention that the Puerto Rico Housing Finance Authority refunding in September 2020 was for bonds supported with U.S. Department of Housing and Urban Development money. Neither the Puerto Rico government nor any subsidiary of it provided the revenue stream for them.

“We continue to execute on the fiscal plan,” Marrero said. “We continue to execute on many initiatives to jump start the reconstruction of Puerto Rico. We believe that is the only way to achieve fiscal responsibility, access to capital markets, and more importantly, create jobs in Puerto Rico and to drive investment in Puerto Rico.”

Throughout his speech Marrero emphasized the value of the recent preliminary agreement with bondholders in lowering the debt burden on Puerto Rico.

On a different topic, he said the local government, of which he is a part, has “more than a disagreement” with the Oversight Board on cutting public pensions. It is a “gatekeeping issue.” Gov. Pedro Pierluisi has said he will not support a plan of adjustment that includes a cut to public pensions.

Marrero said Puerto Rico’s government cut pension benefits in the 1990s and more recently with Act 3 of 2013. He said the Pierluisi government does not feel any further cuts are needed from a legal or financial perspective.

Both the Speaker of the Puerto Rico House and the President of the Puerto Rico Senate, members of a different party than Pierluisi, have said they will not support a plan of adjustment that includes a pension cut, he said.

“We’re talking about poor people,” Marrero said. “The monthly [pension] benefits average is $1,500.” If the cuts were to go through and elders didn’t have resources to support themselves, the local government would have to step in to help with social programs.

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