Puerto Rico still has the capacity to issue more than $3 billion in new debt, senior officials said on Tuesday, adding that they hoped to tap the credit markets in March despite concern about whether the commonwealth can sustain its current large debt load, the New York Times DealBook blog reported yesterday. Officials said on Tuesday that the Puerto Rican legislature had proposed raising the commonwealth’s legal debt limit and proposed creating an independent authority, Cofim, that would issue secured debt on behalf of Puerto Rico’s municipalities. Puerto Rico had already created one such debt-issuing authority, Cofina, to help it through a financial crisis in 2006. But Cofina has used up its entire capacity and was downgraded recently. Officials said that the borrowing in March would consist of general-obligation debt, which is given a special, top-priority status by Puerto Rico’s Constitution. Much of the proceeds will be used to refinance existing debt, including $330 million owed to Barclays. The proceeds are also to be used to terminate interest-rate swaps, fill a $245 million hole in the current fiscal year’s budget and bolster the liquidity of Puerto Rico’s Government Development Bank, which orchestrates the commonwealth’s borrowing and tracks the complex payment schedules and cash flows of different branches of its government. Given its status as a U.S. territory, Puerto Rico is not eligible to file for chapter 9 protection.
