Puerto Rico’s water-supply agency plans to sell about $700 million of debt as soon as June 24, according to three people familiar with the sale who asked for anonymity because the deal hasn’t been finalized.
The junk-rated Aqueduct & Sewer Authority, called Prasa, hasn’t sold debt since February 2012, data compiled by Bloomberg show. It would be the first bond sale from the island since March 2014, when the commonwealth sold $3.5 billion of general obligations, the largest junk-rated municipal deal ever.
Governor Alejandro Garcia Padilla has said Puerto Rico’s public corporations must operate without government subsidies. Last year, he enacted legislation that would have allowed some public agencies, including Prasa, to ask bondholders to reduce their debt load. A federal judge in San Juan threw out that law.
“It is in the category of public corporations,” said Daniel Solender, who helps oversee $17 billion as head of munis at Lord Abbett & Co. in Jersey City, New Jersey. “But this one, for now, is performing. So right now they can cover their debt.”
Prasa debt maturing in July 2042 traded Tuesday at an average price of 70.1 cents on the dollar to yield 7.96 percent, Bloomberg data show. The debt traded as low as 58.6 cents in July 2014.
Norma Munoz, a Prasa spokeswoman in San Juan, said she couldn’t comment on the sale because plans for the deal weren’t final.
“We are focused and positive about it,” Munoz said in an e-mail.
The utility, the island’s main supplier of water, had $4.8 billion of debt as of March 31, according to the commonwealth’s latest financial filings.
Puerto Rico and its agencies owe $72 billion. Those securities have traded at distressed levels for almost two years on concern that the commonwealth won’t be able to repay its obligations on time and in full. The island’s economy has struggled to grow since 2006.
Barbara Morgan, a New York-based spokesman for the Government Development Bank, which manages the island’s debt sales, declined to comment.