Puerto Rico to Issue Long-Term Debt in First Sale Since August

Puerto Rico, whose bonds face a downgrade to junk, plans to issue long-term debt in the next few weeks, according to a spokeswoman.

Officials intend to issue bonds late this month or in February, said Alix Anfang, spokeswoman for the U.S. commonwealth’s Government Development Bank at Washington-based SKDKnickerbocker. It would be the first bond deal from a Puerto Rico issuer since August, data compiled by Bloomberg show. Anfang would not give the size of the borrowing.

Moody’s Investors Service said on Dec. 11 it might cut the island’s general-obligation debt to junk within 90 days if its finances continue to deteriorate and it can’t access capital markets soon. Puerto Rico is important to the $3.7 trillion municipal-bond market because more than three-quarters of U.S. muni mutual funds hold its securities, which are tax-free nationwide.

The commonwealth last year postponed a plan to sell as much as $1.2 billion of sales-tax bonds because interest rates were too high.

Puerto Rico general obligations maturing July 2041 traded Dec. 30 with an average yield of about 9.29 percent, the highest since the debt first sold in 2012, Bloomberg data show. The debt traded today with an average yield of 8.98 percent.

An index that tracks the island’s economic activity contracted in November by 5.7 percent compared with the same month in 2012, according to the Government Development Bank. It was the steepest year-over-year decline since January 2010.

While the planned long-term sale would be the first since August, the bank last month sold $110 million of short-term notes to the Puerto Rico State Insurance Fund Corp. at an interest rate of 8 percent. The debt matures 2017 through 2019.

Before it's here, it's on the Bloomberg Terminal.