The Government Development Bank for Puerto Rico completed a $900 million borrowing deal with banks on Friday.
The deal consists of $700 million in fixed rate notes that come due at the end of Puerto Rico's fiscal year. It also consists of $200 million in a revolving line of credit.
Most of the $700 million was closed on Friday, a banker familiar with the transaction said. The remaining portion of the fixed rate notes will be issued in mid-November. JPMorgan was the lead underwriter.
The fixed rate notes carry an annual interest rate of 7.75%. The revolving line carries an annual interest rate of the one month London Interbank Offered Rate plus 755 basis points, according to a GDB statement.
Puerto Rico will draw on the $200 million line in pieces over time, the banker said.
The $900 million is being lent by JPMorgan, Morgan Stanley, Bank of America, Barclays plc, Banco Popular de Puerto Rico and Amalgamated Bank. The banker said that the bank may resell some of the fixed rate notes to qualified institutional buyers.
"We are pleased to have the support of a syndicate of top-tier financial institutions in this transaction," GDB interim president José Pagán Beauchamp said.
The GDB will use the proceeds of the notes to purchase $900 million aggregate principal of tax and revenue anticipation notes of the Commonwealth of Puerto Rico. These notes will be collateral for and an expected source of repayment of the GDB notes. Consistent with past fiscal years, the GDB is funding an additional $300 million in TRANs purchases, the GDB said. In aggregate, the GDB is expected to lend $1.2 billion to the commonwealth government.
The government's spending is spread out fairly evenly over the fiscal year, whereas most of its tax revenues come in late in the fiscal year, necessitating the sale of the notes. Puerto Rico does a TRANs deal every year, GDB spokesman David Millar said.
The GDB plans to publish an updated liquidity report and will make monthly disclosures regarding its cash and cash equivalents, the GDB stated.
"That will bring a fairly needed disclosure about the credit, because the near term issue is liquidity," AllianceBernstein senior vice president Joseph Rosenblum said. The investing community had had no real update about this topic since Puerto Rico's March general obligation bond sale, he said, and the commonwealth has not been meeting its own schedule for releasing quarterly reports about its financial situation.
