Puerto Rico Gov. Alejandro García Padilla is expected to file a bill authorizing a greater than $2 billion bond this week, a Puerto Rico senator said.
The Puerto Rico Highways and Transportation Authority owed the Government Development Bank of Puerto Rico $2.014 billion as of Sept. 30, according to the liquidity report the GDB released Friday.
The report states, "the projection [of the GDB's liquidity position] herein assumes that the only financing carried out [in fiscal 2015] is a bond issuance to refinance GDB lines to the PRHTA."
Under the bill, Puerto Rico Sen. José Nadal Power said the Puerto Rico Infrastructure Finance Authority would take over the PRHTA's debt to the GDB.
With 21.4% of the GDB's loan portfolio as of Sept. 30 the PRHTA was the GDB's largest debtor.
In late June 2013 Puerto Rico passed increased taxes on crude oil to benefit the PRHTA. It also shifted car license fees and cigarette and tobacco excise taxes to benefit the PRHTA.
In June the Puerto Rico House and Senate finance committees approved legislation to shift the PRHTA debt to PRIFA but neither the House nor the Senate took action on the measures.
Nadal Power said the governor plans to send a new version of the bill to the House and Senate. The governor intends for the bill to be passed by the end of the current legislative session on Nov. 15.
The House and Senate finance committees would have to consider the new version in addition to the full House and Senate, said Nadal Power, who is president of the Senate Finance and Budget Committee. Nadal Power is in the same political party as García Padilla.
Under the bill PRIFA would sell a bond for at least $2 billion to refinance the debt. Much or all of this money would be handed to the GDB. After this the financial markets would perceive the GDB more positively if it were to attempt to borrow, Nadal Power said.
The bill would also shift the PRHTA's new revenue streams to PRIFA to support repayment of the debt, Nadal Power said.
While PRHTA is potentially eligible to restructure its debt using the Recovery Act, PRIFA is not. Because of this PRIFA may have an easier time refinancing the debt.
Reuters reported earlier that two other notes would be refinanced with the bond, bringing the bond size potentially up to $2.5 billion. Nadal Power said he was unsure if this would be part of the bill.
In mid-July GDB senior vice president Natalia Guzmán said despite the revenue increases, the PRHTA was experiencing operating deficits. However, in June the government shifted the authority's money-losing mass transit operations into a new Mass Transit Authority.
In the summer García Padilla told the GDB to develop a plan to address the PRHTA's financial challenges without using the Recovery Act to restructure the debt, Guzmán said.
Puerto Rico's government last sold long-term debt in March, when it sold a $3.5 billion bond maturing in 2035 with an 8.73% yield.
