Puerto Rico Governor-Elect Ricardo Rossell- is seeking $900 million to get Puerto Rico through the current fiscal year.
Rossell- believes that amount is required to fill the gap between needed spending and expected revenue, an advisor said. One possibility is to sell a tax and revenue anticipation note, though he isn't actively pursuing a TRAN now.
Instead, he is exploring several approaches to getting the $900 million, the advisor said.
Rossell- takes office in January with Puerto Rico in the midst of a growing financial crisis. After defaults by the government and related authorities on between $1.4 billion and $1.8 billion in the last 12 months, completing an affordable borrowing from individuals or the private sector may prove to be difficult.
On Wednesday Puerto Rico's 2014 general obligation bond maturing in 2035 was trading with an 11.81% interest rate.
Puerto Rico has relied on short-term borrowings because most of its revenues come in near the end of the fiscal year, while its expenses were evenly spread over the year.
The last time Puerto Rico borrowed on a short-term basis was in March 2015, when it sold a $246 million bond anticipation note to RBC Capital Markets. The BAN, which is still outstanding, was supported by an oil tax increase.
The BAN from the Puerto Rico Infrastructure and Finance Authority replaced a Puerto Rico Highways and Transportation BAN that was redeemed and retired, which RBC bought in August 2013, according to a spokesman for the Government Development Bank for Puerto Rico. PRIFA defaulted on a different note Nov. 1.
According to the Electronic Municipal Market Access web site, the RBC BANS carry an 8.25% interest rate and mature on May 1, 2017. The notes had their first call date on April 6, 2015 and could be and still can be called any time thereafter until maturity on the first of each month.
The previous time Puerto Rico borrowed on a short-term basis was in October 2014, when the Government Development Bank for Puerto Rico completed a $900 million borrowing deal with six banks. The deal consisted of $700 million in fixed rate notes that came due at the end of Puerto Rico's fiscal year, which was June 30, 2015. It also consisted of a $200 million revolving line of credit.
JPMorgan was the lead underwriter in that deal. JPMorgan, Morgan Stanley, Bank of America, Barclays plc, Banco Popular de Puerto Rico, and Amalgamated Bank did the lending.
The GDB used the proceeds to purchase $900 million aggregate principal of TRANS from the Commonwealth of Puerto Rico. The Puerto Rico notes were the collateral for and source of repayment of the GDB notes.
On Thursday JPMorgan and Morgan Stanley declined to comment on whether they had been contacted by Puerto Rico or Rossell- for short-term financing. Banco Popular, and RBC Capital Markets didn't respond to inquiries.
The $246 million borrowing deal was the last one Puerto Rico has been able to gain. It has been locked out of the borrowing market first by deep concerns over its ability to repay and, later, by its actual defaults.
