NEW YORK, Oct 15 (Reuters) - Puerto Rico will do whatever it takes to honor its debt commitments, Governor Alejandro Garcia Padilla said on Tuesday, as local officials tried to reassure investors after a jump in yields effectively shut the U.S. commonwealth out of capital markets.
Puerto Rico’s bonds have been trading at around 60 cents on the dollar, pushing yields up above 9 percent and forcing Puerto Rico to rely on private debt sales to banks instead of issuing debt on capital markets.
Investors have largely ignored a series of reforms aimed at kick-starting the economy and reigning in Puerto Rico’s public finances, instead treating the Caribbean island’s debt as a potential default risk.
“We will do everything, and I repeat everything, that is necessary for Puerto Rico to honor all its commitments. It is not only a constitutional but also a moral obligation,” Padilla said at the start of a conference call with investors that lasted nearly two and a half hours.
Puerto Rican officials have expressed frustration at their rising borrowing costs, saying investors are not recognizing painful reforms to the pension and tax systems and are unfairly punishing the commonwealth in comparison with U.S. states in similar or worse situations.
Officials from Puerto Rico’s Government Development Bank, also present on the conference call, said they have enough liquidity to finance the commonwealth through at least the end of the current fiscal year in June 2014.
Officials did not rule out further private placements of sales tax revenue bonds, known as COFINA bonds, this year and said they would only issue debt in the $3.7 trillion municipal bond market if conditions improved significantly.