Puerto Rico Debt Crisis: A Bond Guide as Potential Defaults Loom

Pedestrians walk along Calle Fortaleza in Old San Juan, Puerto Rico, on Aug. 14.

Pedestrians walk along Calle Fortaleza in Old San Juan, Puerto Rico, on Aug. 14.

Photographer: Derick E. Hingle/Bloomberg
  • Commonwealth faces $500 million cash shortfall in June
  • Government Development Bank owes $354 million in December

Puerto Rico will begin sitting down with creditors in the next few weeks after the financially stressed commonwealth said it’s short about $13 billion needed for bond payments in the next five years.

In a government-sponsored report released Wednesday, Puerto Rico was unclear what debt would be affected in a restructuring of its $72 billion in obligations, only saying that it would present bondholders with terms soon and that it wants a moratorium on principal payments.

Like other municipal borrowers, the island has many types of bonds, sold by multiple agencies and backed by different funds and legal safeguards. Unlike mainland municipalities, Puerto Rico doesn’t have the option of seeking a restructuring through bankruptcy, so its going directly to bondholders for relief.

The risk of default is real. A commonwealth entity defaulted for the first time when the Public Finance Corp. missed debt-service payments in August and September, after lawmakers failed to allocate the funds. Standard & Poor’s said in a report Thursday that all of Puerto Rico’s tax-backed debt is highly vulnerable to default.

Here’s a list of the island’s biggest bond issuers, how much long-term debt they have, and when major monthly payments are due, according to data compiled by Bloomberg.

General-obligations: $13 billion. The debt backed by the commonwealth’s full faith and credit. The island’s constitution says general obligations must be repaid before other expenses. Puerto Rico owes $357 million of interest in January and an additional $805 million of principal and interest is due July 1.

Puerto Rico Sales Tax Financing Corp.: $15.2 billion. The bonds, known by the Spanish acronym Cofinas, are repaid from dedicated sales-tax revenue. A $6.2 billion portion of the debt, called senior-lien, is repaid first. The remaining $9 billion, called subordinate-lien, get second dibs. After paying $1.2 million of principal and interest in August, $1.2 million of interest is due in November, February and again in May.

Puerto Rico Electric Power Authority: $8.3 billion. Prepa, as it’s called, is the island’s main supplier of electricity and repays the debt from what it charges customers. The utility owes $196 million of interest in January and $420 million of principal and interest July 1.

Puerto Rico Government Development Bank: $5.1 billion. The GDB lends to the commonwealth and its localities. When those loans are repaid, the bank can pay off its debt. The GDB is seeking to restructure its obligations through a debt exchange. The bank owes $354 million in December and $422 million in May.

Puerto Rico Highways & Transportation Authority: $4.7 billion. The highway agency repays its debt with gas-tax revenue. It owes $106 million of interest in January and $220.7 million of principal and interest in July.

Puerto Rico Public Buildings Authority: $4.1 billion. The PBA bonds are repaid with lease revenue from public agencies and departments of the commonwealth. The agency owes $102.4 million of interest in January and $207.6 million of principal and interest in July.

Puerto Rico Aqueduct & Sewer Authority: $4 billion. The utility, called Prasa, supplies most of the island’s water. The debt is repaid from water rates charged to customers. The water agency owes $86.5 million of interest in January and $135.1 million of principal and interest in July.

Puerto Rico Pension-Obligation Bonds: $2.9 billion. The taxable debt was sold to bolster the island’s main pension fund. The bonds are repaid from contributions that the commonwealth and municipalities make to the retirement system. The next maturity is July 2023 and the system pays $13.9 million of interest every month in this budget year.

Puerto Rico Infrastructure Financing Authority: $1.9 billion. Called Prifa, the agency has sold the island’s rum-tax bonds. These are securities repaid from federal excise taxes on rum made in Puerto Rico. Prifa owes $37.2 million of interest in January and $77.8 million of principal and interest in July.

Puerto Rico Public Finance Corp.: $1.09 billion. The PFC bonds are repaid with money appropriated by the legislature. The agency defaulted on its Aug. 3 and Sept. 1 debt-service payments because the legislature failed to allocate the funds. It owes interest every month, the largest being a $24 million payment in February.

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