Puerto Rico Approves GO Bond With Possible New York Oversight
Puerto Rico Gov. Alejandro García Padilla signed a bill Tuesday authorizing the sale of as much as $3.5 billion in general obligation bonds and allowing New York court oversight over disputes over the bonds.
"The bill authorizes the [Puerto Rico] Secretary of the Treasury to consent to New York as choice of law and jurisdiction with respect to the bonds," said Treasury Secretary Melba Acosta Febo and Puerto Rico Government Development Bank chairman David Chafey.
Some investors believe that in the case of a default on the bond a New York state court might give a more bond-holder friendly ruling than a Puerto Rico court would.
"We plan to use the offering proceeds principally to repay outstanding lines of credit with the GDB, strengthen the GDB's liquidity, and refinance other outstanding debt," Acosta Febo and Chafey said. Some of the outstanding debt is about to expire, according to the governor's office.
"This proposed bond issuance will support Puerto Rico's ongoing and aggressive actions to continue strengthening its fiscal position and will provide additional flexibility as the island continues its progress on economic development and job creation initiatives."
In February Puerto Rico officials said the bond sale would be roughly $2.8 billion and possibly more than $3 billion.
Barclays will be the senior manager on the planned bond sale. Morgan Stanley and RBC Capital Markets will be joint lead managers along with Barclays.
Moody's Investors Service has said Puerto Rico has a tentative plan to sell the bond on Tuesday, March 11.