The Government Development Bank for Puerto Rico Friday clarified the total amount of loans that it is requesting from the Federal Reserve and the Troubled Asset Relief Program. The GDB is looking to borrow a total $5 billion from both programs combined.
“The request is for the total amount of $5 billion from both institutions,” said William Lockwood, GDB’s executive vice president and fiscal agent. “It’s not a request for $10 billion. The request was sent to the Secretary of the Treasury and to the chairman of the Federal Reserve Board, so it could either be fully from the Treasury or shared with the Federal Reserve or totally from Federal Reserve.”
Puerto Rico is also planning to issue $250 million to $500 million of sales tax bonds next month to help boost economic activity and provide “bridge financing” until the government can craft structurally balanced budgets.
“The focus for these three sources includes private-sector development financing, infrastructure financing, and a stabilization effort for the pharmaceutical sector and biotechnology sector so it has more of a medium-term perspective,” Lockwood said. “We would like to start on these efforts as soon as possible to strengthen the economy.”
If the $5 billion from the TARP and/or the Fed fails to come through, Lockwood said the GDB would look towards local sources of capital.
“The alternative sources include prudent amounts from institutional assets in Puerto Rico across many different categories and some of them are fiduciary funds, a minority of them probably,” he said. “We would need to be very cautious about preserving principal and having a market-rate return. Now, that is a very positive challenge for the bank because that forces us to support projects that have a very high rate of return, both in the private sector and the public sector. And that’s the kind of efficiency [we] need in the restructuring of the economy.”