Puerto Rico May Get About $2 Billion From Petroleum-Tax DebtMichelle Kaske
Puerto Rico lawmakers are set to pass changes to a borrowing plan that would raise about $2 billion by selling bonds backed by petroleum taxes, said a legislator from the island.
The U.S. territory’s legislature will consider changes to the measure on Thursday in San Juan, Assembly Representative Rafael Hernandez said in an interview. The steps will allow the Government Development Bank to offer higher interest rates on the issue and attract more investors.
The law boosts the junk-rated island’s tax on petroleum products to $15.50 per barrel of oil from $9.25 and lets Puerto Rico’s Infrastructure Financing Authority sell debt backed by the tax increase. The increase takes effect March 15, Hernandez said. Earlier plans tied the shift to passage of broader tax changes.
“It doesn’t matter if we pass the tax reform before or after March 15,” said Hernandez, who’s chairman of the House Treasury Committee.
The borrowing plan will replenish the Government Development Bank’s cash. The bank lends to the commonwealth and its localities. Bond proceeds will repay money the Highways & Transportation Authority owes to the GDB, which accounts for 21 percent of the bank’s loans.
Changes to the bond measure cap the average coupon at 8.5 percent and give flexibility in discounting the price of the securities, Hernandez said.
“It was too rigid,” Hernandez said about the earlier pricing guidelines. The amendment “gives the GDB an opportunity to go to the market to find something closer to the reality of the market.”
General obligations sold in March 2014 and maturing in July 2035 traded Thursday with an average yield of 9.54 percent, or about 86 cents on the dollar, data compiled by Bloomberg show.