Puerto Rico House Bill Would Put TRANS Under New York Jurisdiction

Puerto Rico House of Representatives President Jaime Porell- Borás is working to have Puerto Rico's anticipated $900 million tax and revenue anticipation note governed by New York State law.

Porell- Borás introduced a bill changing the laws and conditions for Puerto Rico's TRANS on Monday in the Puerto Rico House. Puerto Rico's $3.5 billion bond sale in March was issued subject to New York law after market participants said it might assure a greater recovery in the event of default than would come under a Puerto Rico court.

Porell- Borás is in the same party as Gov. Alejandro García Padilla. The governor's office didn't respond to The Bond Buyer with the governor's opinion of the bill.

The bill specifies that disputes would be heard in a state or federal court in Manhattan, New York City. It states that Puerto Rico would wave immunity from suits concerning TRANS.

The bill would set up a special fund to receive monies just to pay back the notes. A third party trustee would oversee the fund.

However, Puerto Rico's waiver of immunity would not extend to its property outside of the fund.

Puerto Rico needs to issue TRANS because it typically receives a proportionately small amount of revenue early in the fiscal year and a proportionately large amount late, while the government's spending demands are spread more evenly across the fiscal year.

In other Puerto Rico borrowing news, Moody's Investors Service reported Wednesday that Puerto Rico was considering having its Puerto Rico Infrastructure Finance Authority sell a bond.

In 2013 the Puerto Rico Highways and Transportation Authority gained petroleum product taxes, a cigarette tax, and motor license fees previously allocated to the commonwealth's general fund.

The PRHTA has $325 million in outstanding bond anticipation notes. It owes $2.1 billion to the GDB, which is currently due on Jan. 31, 2015.

PRIFA would issue a bond backed by the PRHTA's new revenues to pay down the PRHTA's BAN and money owed to the GDB, Moody's analyst Edward Hampton said.

The Puerto Rico Corporations Debt Enforcement and Recovery Act, allowing public corporations to restructure debt, could be applied to PRHTA. However, the act does not apply to PRIFA, which may allow PRIFA to sell debt at lower interest rates than the PRHTA could.

Moody's analyst Edward Hampton said that even if PRIFA doesn't issue the bond, he didn't believe that the PRHTA would default on the GDB debt. "We believe GDB will continue to modify the terms as needed to assist the authority, as it has in the past," Hampton said.

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