Puerto Rico has declared a moratorium on payments on an additional Puerto Rico Infrastructure Finance Authority bond issue.
The order authorizing the payment moratorium at the Government Development Bank for Puerto Rico, signed Sunday by Gov. Alejandro García Padilla, also stopped payments on PRIFA's Series 2011B bonds.
GDB President Melba Acosta Febo told the El Vocero news website there was $143 million outstanding on the bonds. The official statement for the bonds indicates there is $190 million outstanding. The GDB did not respond to an inquiry to explain the discrepancy.
When the Series 2011A, 2011B, and 2011C bonds were sold, the official statement said "prospective purchasers of the bonds should look to the GDB letter of credit as the sole source of payment for the bonds." The Puerto Rico Ports Authority would be obliged to pay back the loan but it would be the authority's "general, unsecured obligation."
The taxable Series 2011A bonds matured in June 2013. Series 2011C, subject to alternative minimum tax, matures in 2026.
The tax-exempt Series 2011B bonds have maturities from 2014 to 2026.
Interest payments are supposed to be made every June 15 and Dec. 15, according to the official statement. The next principal payment of $2,055,000 is due on Dec. 15.
"Under the Loan and Trust Agreement, the trustee is required to declare the bonds immediately due and payable at par prior to maturity upon the occurrence of an event of default, including an act of bankruptcy of the [GDB]," the OS stated.
Bondholders "have the GDB guarantee that says if there is a default, they can call all the notes now and the GDB turns around and charges the [PR]IFA," said GDB president Melba Acosta Febo, according to the El Vocero news web site. "But neither the GDB nor the [PR]IFA have the funds. An emergency was declared for [PR]IFA, but it is for the port notes, so that the bank would not have to exercise the guarantee."
PRIFA's 2011A, 2011B, and 2011C bonds do not have debt service reserves. The Bank of New York Mellon is the bond trustee.
The moratorium on the 2011B bonds follows a default on PRIFA's rum tax bonds, which started Jan. 1.
