Puerto Rico’s short term funding needs are sending out warning bells. The Padilla Administration has been pushing the Commonwealth Legislative Assembly to agree to an increase in the Sales Use Tax to 3.5 percent from 2.75 percent. With this diverted revenue, the government could issue a third series of Cofina bonds for approximately $2 billion. This third tranche would be subordinate to the first two series of Cofina bonds, but have higher ratings than PR general obligations bonds and other public authority debt. The additional Cofina debt may be needed for short-term borrowing done through private placements.
El Neuvodia reports on the action in the Legislative Assembly (translated from Spanish):
Although they stressed there is ‘no rush’ to go to the markets, the principal officers of the prosecution team of Alejandro García Padilla administration today defended the move in a joint public hearing of Finance committees in the House and Senate.
‘We need to refinance this debt,’ said Interim President of GDB, José V.Pagan, referring to $1.223 million that would have been used to cover the daily expenses of the government.
Meanwhile, Debtwire ran an unsourced story that said U.S. government officials would consider backstopping a new issue of Puerto Rico bonds: