Puerto Rico to sell $8 billion of bonds by August
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| Published on Saturday, June 9, 2007 |
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By Adam L. Cataldo
NEW YORK. USA (Bloomberg): Puerto Rico Governor Anibal Acevedo Vila said the US commonwealth will sell as much as $8 billion of bonds by the end of August to refinance debt and lower interest costs.
Puerto Rico will sell up to $6 billion of bonds backed by sales tax revenue to pay off debt that doesn't have a dedicated source of repayment and was sold to pay for projects and help the government fill budget shortfalls, he said. The Caribbean island will sell another $1.5 billion of bonds to refinance existing general obligation debt.
"I think it is going to tell the markets we are for real when we say we are going to fix Puerto Rico's fiscal problems," Acevedo Vila, 45, said in an interview. "It's the kind of decision that you don't see results tomorrow, but I think four years from now five years now it will to make a huge difference."
Acevedo Vila is planning the refinancing as part of efforts to shore up Puerto Rico's finances amid a recession that prompted Standard & Poor's last month to cut the commonwealth's debt rating to within one step of junk status. The governor led efforts to impose the island's first sales tax, and has taken steps to cut both spending and the government's workforce, which has been trimmed by 14,000 since September 2004.
"It is the first time in history in which you have real fiscal responsibility in terms of the government of Puerto Rico," Acevedo Vila said. "We have a plan, it is moving forward."
Acevedo Vila said the $6 billion of sales-tax bonds will be backed by using revenue from 1 percent of the 5.5 percent sales tax that was implemented in November. Revenue is $4 million ahead of the projected $576 million in expected collections for the current fiscal year ending June 30, Acevedo Vila said.
The government will save $50 million to $100 million on its planned $1.5 billion refunding, Acevedo Vila said. That transaction may grow to $2 billion if the Legislature approves $500 million in new general obligation bonds to pay for capital projects.
Acevedo Vila last month proposed a $9.23 billion budget for fiscal 2008 fiscal that calls for a second straight year of spending cuts. The governor said he expects to reach an agreement with the Legislature on a new budget, after last year forcing a government shutdown amid a clash with lawmakers in a rival political party.
The governor, elected in 2004, is a member of the Popular Democratic Party, which wants to maintain the Caribbean island's status as a US commonwealth. The New Progressive Party controls the Legislature, and wants to see Puerto Rico become a US state.
"There is no threat of any government shutdown," Acevedo Vila said.
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