Sell Side

Buffett Brings Insurance Efforts to Puerto Rico, Applies for License

Puerto Rico debt may gain Warren Buffett’s guarantee. The Government Development Bank for Puerto Rico met with Berkshire Hathaway Inc. in December at the company’s request, and the insurer told the bank it would apply for a Puerto Rico license, GDB spokeswoman Maria Rosario confirmed yesterday. Buffett spokeswoman Jackie Wilson said the commonwealth “is high on the list” of potential issuers. Buffett’s Berkshire Hathaway Assurance Corp. just received a license to operate in New York. Officials there have said it has applied for one in California and intends to focus its business in the eight to 10 states and jurisdictions where the largest amount of municipal debt is issued, which would include Puerto Rico. Issuers in the commonwealth sold more than $12.2 billion in 2007, ranking it ninth, according to data from Thomson Financial. Having a new insurance company in the market could help the island by providing more choices and insuring power, according to Bob MacIntosh, vice president and co-director of Eaton Vance’s municipal bond group. Eaton Vance’s $1.13 billion High Yield Municipal Bond Fund, its largest muni fund, includes Puerto Rico sales tax debt as its largest holding, according to Morningstar Inc. “There have been many times in the past where the existing insurers just ran out of capacity to continue to insure different Puerto Rico credits, so this will allow them to have more availability of insurance,” MacIntosh said. “So, I think they should be pleased with it.” If Berkshire obtains its license from the commonwealth to insure Puerto Rico bonds, the company will have plenty of commonwealth debt to bid on. Upcoming bond sales for the island include a $930 million tax-exempt Puerto Rico Aqueduct and Sewer Authority deal that may price as early as February. The GDB also expects to sell $4 billion of taxable pension bonds and $150 million of taxable Puerto Rico Tourism Co. debt within the next three months. MacIntosh said he welcomes the new insurer during this time of downgrades in the insurance industry. “I feel very confident when he gets a triple-A, it’ll stay a triple-A,” he said. “There won’t be any straying into areas that these other guys shouldn’t have gone into.” GDB president Jorge Irizarry said the bank welcomes Berkshire as a potential insurance bidder. “The interest in insuring Puerto Rico bonds from one of the highest-rated and prestigious companies in the world is a sign of confidence in the quality and stability of Puerto Rico’s credit and a very positive development for our future financings,” Irizarry said in a prepared statement. “At this time, Berkshire is working on the specific documents required for registering to do business in Puerto Rico. We look forward to potential bond insurance offers from Berkshire in the near future.” We’d like to know what you think. We invite you to call us, e-mail us, and post comments on our related Weblog, The Bond Blogger, at http://blog.bondbuyer.com.


Upcoming Events

Already a subscriber? Log in here
Please note you must now log in with your email address and password.