Puerto Rico Extends Moratorium to PRIFA BANs

Puerto Rico said it wouldn't be paying bond anticipation notes from the Puerto Rico Infrastructure Finance Authority.

Late Friday Puerto Rico Gov. Alejandro García Padilla said he had signed an executive order declaring the notes to be covered by the Puerto Rico Emergency Moratorium and Rehabilitation Act. Puerto Rico's government adopted the act in April as a means, it says, to allow itself to legally stop payment on some of its debts. Bondholders have challenged the moratorium in court.

The BANs covered are the Series 2015A notes had a dated date of May 17, 2015. The notes, with an initial par amount of $246 million, offered an 8.25% interest rate. Their ultimate maturity was May 1, 2017, and their CUSIP is 745223AA5.

Bank of New York Mellon is the Trustee Agent.

On June 10 PRIFA made a posting to the Electronic Municipal Marketplace Website saying that it would redeem about $13 million in principal from these notes on July 1 at a 6% discount on par. The governor's order apparently overrides this statement.

"The commonwealth's economic outlook continues to deteriorate and proof of it are the actions taken today with this executive order," García Padilla said. "In facing this crisis, we urge the U.S. Senate to act on PROMESA, which although imperfect, offers an effective solution to address the fiscal emergency we face."

The U.S. Congress is currently considering the so-called PROMESA bill, which would impose a financial control board on Puerto Rico's government and would allow the board to petition a court to restructure the commonwealth's and its authorities' and public corporations' debts.

Puerto Rico has already used the Moratorium Act to declare a moratorium on principal payments on Government Development Bank for Puerto Rico debt and PRIFA's Series 2011B bonds. Outside the act, Puerto Rico has stopped payment on its Public Finance Corporation bonds and PRIFA's rum tax bonds.

Puerto Rico GDB president Melba Acosta Febo has said Puerto Rico doesn't expect to make a full payment for its general obligation bonds on July 1. Other observers have said that the island's government is likely to default on some other bonds then as well.

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