Puerto Rico officials are working on addressing nearly $600 million of auction-rate debt that will go up for auction within the next two weeks, with the Government Development Bank for Puerto Rico considering converting the bonds into variable-rate or fixed-rate debt.

The island has already felt the shakiness of the auction-rate market as $63 million of auction-rate general obligation debt failed on Tuesday and reset at 12%, the interest rate ceiling. Goldman, Sachs & Co. ran the failed auction and the debt is insured by CIFG Assurance North America Inc. The following day, $50 million of GO debt reset at 10.8% in a Lehman Brothers auction with bonds insured by Financial Guaranty Insurance Co.

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