Puerto Rico Notes Show Cost of Economy’s Struggle: Muni Credit
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A sale of $900 million of notes by Puerto Rico’s Government Development Bank, the first borrowing from the junk-rated island since a debt-restructuring law passed in June, is showing the cost of a deteriorating economy.
The transaction was part of a short-term financing that generated $1.2 billion for the commonwealth. The GDB offering included $700 million of fixed-rate securities due in June 2015 and priced to yield 7.75 percent, according to the bank. Benchmark issuers pay about 0.14 percent to borrow for a year, data compiled by Bloomberg show. When the U.S. territory sold 13-month notes three years ago, the yield was 1 percent.