Puerto Rico files to sell debt before possible default

The US territory's primary fiscal agent, the Government Development Bank of Puerto Rico, has filed with regulators to issue taxable one-year debt as it faces an impending default on May 1.

The Fiscal Times reported that the filing with the Municipal Securities Rulemaking Board made listing of the size of the possible agreement or the coupon. It is said that the potential sale could happen on Wednesday.

A website entry in the rulemaking board's online database said that GDB received an identification number of the securities it propose to sell; however, the issuance number does not guarantee the securities will actually be sold. On May 1, GDB owes creditors $422 million, a debt which Puerto Rico's governor, Alejandro Garcia Padilla, said it cannot afford to pay. The default at GDB would be the island's most significant default to date.

According to Yahoo News, the government of Puerto Rico plans to swap $49 billion of debt into up to $28 billion of base bonds, and almost $2 billion of tax-exempt capital appreciation bonds. The officials said that the voluntary exchange would permit creditors to recover the full principal which they invested regardless of the economic growth rates in the future.

The proposal also encompasses a special measure for those who live in Puerto Rico and hold specific bonds. Officials said in a statement that the group could receive up to $8 billion of local holder base bonds that could repay the whole amount of the principal they previously invested at an interest rate of 2 percent.

Governor Padilla declared a state of emergency at GDB this month and signed an emergency bill which allows him to declare a moratorium on the May 1 payment if no restructuring is achieved before the said date.  The US House is also working on a measure targeted at resolving the financial crisis of Puerto Rico, but the process also has its own share of roadblocks, reports Reuters.

US Senator Orrin Hatch told the media that the current draft authored by the Republican-led House Natural Resources Committee is not going to work and will not be able to pass the Senate.

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Puerto Rico, sell debt, default, us puerto rico, Puerto Rico debt crisis, Puerto Rico economy, US territory, puerto rico creditors, debt default, us legislation

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