- Prasa is seeking to raise revenue for capital projects
- Bonds would be island's first long-term issuance in two years
Puerto Rico’s House of Representatives approved a bill to allow the island’s main water utility to issue debt with a stronger repayment pledge, a step aimed at allowing the agency to raise money needed to avoid missing payments on other bonds
The measure was approved by a vote of 35 to 10, according to Michelle Gonzalez, spokeswoman for House Speaker Jaime Perello. The legislation enables the Puerto Rico Aqueduct and Sewer Authority, known as Prasa, to create a new corporation to sell securitization bonds, which would be backed by revenue that goes directly to repaying the debt rather than flowing through Prasa’s accounts, according to Rafael “Tatito” Hernandez, sponsor of the legislation and chair of the House Treasury Committee.
Bond proceeds would finance capital projects and pay contractors. Lawmakers Monday made changes to the bill, including limiting the amount of revenue that can repay the bonds equal to 20 percent of the agency’s water rate, Hernandez said. It also prohibits Prasa from increasing its rates for three years. The measure now heads to the Senate, which has its next scheduled voting session on Monday.
The borrowing would help Prasa avoid missing payments on some existing bonds. It warned investors last week that without the proposed securitization bond sale, the water agency may redirect cash to pay contractors rather than repay certain utility debt. Prasa pulled a $750 million debt offering in August after the commonwealth defaulted on an unrelated debt payment.
Puerto Rico and its agencies, which owe $70 billion, have been shut out of the capital markets after Governor Alejandro Garcia Padilla in June said the island would seek to restructure its securities. The commonwealth’s last long-term borrowing was a $3.5
billion general-obligation bond sale in March 2014, most of it sold to hedge funds and distressed-debt buyers.
Prasa had $4.7 billion of debt as of Sept. 30. The bonds carry junk ratings from the three largest credit-rating companies.