Puerto Rico Seeks to Restructure Municipal Finance Agency Bonds

The government of Puerto Rico is taking steps to restructure Municipal Finance Agency bonds and other public debts.

Puerto Rico’s tax agency and financial advisory authority, which oversees Governor Pedro Pierluisi’s administration debt, told The Bond Buyer on Friday that they would seek to restructure MFA bonds and other unsecured debt. .

To pursue a restructuring using the Puerto Rico Supervision, Management, and Economic Stability Act, the Puerto Rico Board of Supervisors should file a Title III or Title VI debt adjustment in the local federal court.

“We are reviewing the governor’s proposal and will respond in detail when we have completed our analysis,” the board said when asked if it would support debt restructuring.

San Juan, pictured, is one of the cities supporting a bond that the government of Puerto Rico plans to restructure.

Bloomberg News

FAFAA said the principal of the outstanding bond was $171 million on Friday, but on Thursday it said it was $192 million. The government’s past outlines of debt showed an outstanding balance of $242 million. When asked to clarify this, FAFAA did not immediately respond. According to the authority, Series 2002A and Series 2005A bonds are outstanding.

Debt service on the bonds continues to be paid in full and on time.

Puerto Rico’s municipal government taxes on real estate and personal property support the bonds. For example, Series 2005A bonds are funded by taxes from residents of Puerto Rico’s major cities of San Juan, Bayamón, Carolina, and Guaynabo.

On Monday, Pierluisi’s press office released a statement outlining the desired measures to improve the finances of Puerto Rico’s municipal governments. One of them suggested that the experience gained by the FAFAA during the restructuring of central government bonds which has just been completed could be put to financial use by the cities.

“Restructuring could just mean market-based refinancing and no defaults,” said Matt Fabian, partner at Municipal Market Analytics. “Yet the AMFs are one of the few bond transactions in Puerto Rico on which the board did not default, which was surprising. A hypothetical default by the AMF would raise the question of whether it There are other securities (like housing or tobacco) that haven’t been written down before that are also heading into default.”

In fall 2016, the local government of Puerto Rico included a summary of Puerto Rico’s debt as an appendix to a proposed budget plan for the Commonwealth of Puerto Rico. The appendix indicates that 91% of AMF debt was insured.

Assured Guaranty said on Friday it had insured $136 million in bonds. Both MBIA and Ambac said they had no exposure. The other bond insurers could not immediately be reached for comment.

Currently, revenue from Puerto Rico’s Municipal Real Estate and Personal Property Tax goes to the Municipal Tax Collection Center (CRIM). Part of this money goes to the Communal Public Reimbursement Fund. From there, most of this money goes to the AMF trustee and payment of AMF obligations.

AMF bonds are general bonds of individual municipal issuers.

Louis R. Hancock