Puerto Rico is pushing for its water utility to borrow hundreds of millions of dollars to avoid a July bond default, seeking to overcome investors’ skepticism as the island’s fiscal crisis pushes it to skip payments on a growing share of its $70 billion of debt, Bloomberg News reported yesterday. The commonwealth’s lawmakers are working to reach a compromise this week on legislation that would create a new public corporation to sell securities for the Puerto Rico Aqueduct and Sewer Authority, known as PRASA. The debt would be repaid with a charge on customers’ bills steered straight to the new agency, providing some measure of security to bondholders by putting it beyond the utility’s reach. “Once we get this bill done and it becomes law, I’m confident that the market will see it as a good way to invest and lend money to PRASA,” said Senator Ramon Luis Nieves, who chairs that chamber’s committee on energy affairs and water resources and is working on the bill. The legislation is an effort to revive a sale that was scrapped after Puerto Rico in August defaulted on some bonds for the first time since it became a U.S. territory more than a century ago. The commonwealth has since failed to make full payments on other securities and has given Governor Alejandro García Padilla the authority to declare a moratorium on a vast swath of its debt, including PRASA’s. Read more.
In related news, a new version of a congressional bill to help Puerto Rico address its $70 billion debt crisis may advance next week toward floor action, according to Rep. Rob Bishop of Utah. The new draft won’t have significant changes and the basic concepts of the bill, to get Puerto Rico out of its fiscal crisis, are the same, Bishop said yesterday during an interview at Bloomberg News. Bishop serves as chairman of the House Natural Resources Committee, which has been tasked with crafting the Puerto Rico measure. It’s feasible that the bill could reach President Barack Obama’s desk by July 1, Bishop said. The bill would create a federal control board to approve Puerto Rico’s spending plans and oversee any debt restructurings. The measure would also provide a framework for Puerto Rico to lower its $70 billion debt load as the island doesn’t have access to the municipal bankruptcy laws, as Detroit did. Read more.
What are the next steps for Puerto Rico to resolve its financial distress? A panel of experts at Thursday’s New York City Bankruptcy Conference will examine potential remedies. Click here to register.
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
