Governor’s fi scal team meets with credit-rating agencies
As of press time, Gov. Alejandro García Padilla's fiscal team was scheduled to meet in New York this week with members of Standard & Poor's and Moody's Investors Service to assuage bondholder's fears of further downgrades for Puerto Rico bonds and test the waters for future commonwealth bond issues.
The commonwealth plans to issue about $1.5 billion in bonds this year, sources said. Puerto Rico is preparing to go back to the U.S. municipal-bond market for the first time in a year with plans to issue $500 million in Sales Tax Financing Corp. (Cofina by its Spanish acronym) bonds this month or next.
There should be no further downgrade of Puerto Rico bonds based on the governor's fiscal team's latest reports on commonwealth revenue, which, while slightly below projections set during a meeting in December, were still in keeping with parameters set by the credit-rating agencies to avoid changes to the island's credit.
Treasury Secretary Melba Acosta Febo, Economic Development & Commerce Secretary Alberto Bacó Bagué, and Interim Government Development Bank President José Pagán were among the high-ranking officials who were slated to meet with credit-rating agencies.
"It is too early to tell the effect on bonds, but the fiscal moves that have been coming out of the government lately have been very good. Puerto Rico has been complying with a lot of what the rating agencies wanted done," said Miguel Soto, president of independent economic think-tank the Center for a New Economy. "The big issue is going to be that a lot of new revenue is coming from severe taxation and we have to wait and see what the effect of this is on the overall economy."
Within the next few weeks, Puerto Rico lawmakers are scheduled to submit proposed legislation aimed at improving the island's economy and increasing the commonwealth's capacity to borrow. Among bills pending are moves to remove caps on limiting exemptions on interest from local mortgages. The Legislature also is slated to file bills temporarily earmarking 0.5% of funds from the municipal sales tax to Cofina to increase the corporation's borrowing capacity by $1 billion.