* Officials say other offerings will follow
* Island's FY2012 audit report will miss July deadline
SAN JUAN, July 18 Puerto Rico will return to the
U.S. municipal bond market with a $600 million deal by the
Puerto Rico Electric Power Authority (Prepa), with pricing
expected in mid-August, a senior finance official on the
Caribbean island said on Thursday.
A big issuer of tax-free bonds with about $70 billion of
outstanding debt, Puerto Rico has near junk-bond credit ratings
and pays the highest interest rates among large tax-free
The U.S. commonwealth has not sold bonds in America's $3.7
trillion muni market in more than a year but has plans to
refinance $3.3 billion of debt by island issuers by year's end.
Finance officials, including José Pagan, interim
president-designate for the Government Development Bank who
announced the Prepa offering during a teleconference, decided to
go with the utility deal first because it is among the strongest
Prepa's credit rating was downgraded by Moody's Investors
Service in June to Baa3 from Baa2, one step above junk. Likewise
Fitch downgraded Prepa in July to BBB minus.
The Prepa deal will not depend on completion of Puerto
Rico's Comprehensive Annual Financial Report (CAFR), which
commonwealth officials are still completing for fiscal year
Puerto Rico officials had promised to deliver the report by
July 31, but Treasury Secretary Melba Acosta told investors on
the conference call it would likely take "three or four weeks"
The government is awaiting audited reports from the Ports
Authority and the University of Puerto Rico, which are nearly
complete, Acosta said.
In May, Prepa Executive Director Juan Alicea Flores told
Wall Street investors that $80 million in Prepa's construction
fund would be exhausted in July.
He said the new bond issue would finance the capital works
program of the new utility, which is focused on a transforming
oil-burning units to natural gas and improving transmission
Once the CAFR is filed, Puerto Rico will look to undertake a
refinancing of $600 million of general obligations bonds, before
pursuing refinancing deals for a set of public corporations,
including the "bonding out" of a $2.2 billion GDB loan to the
Highways & Transportation Authority (HTA).
"We want to make sure we have a good reception for the GO
credit. Then, we will go with the transaction HTA," said Pagan,
who was named interim president on Tuesday after the resignation
of GDB President Javier Ferrer. Ferrer's resignation is official
The government also plans to execute before year's end a
refinancing of $175 million in Public Buildings Authority bonds
and $400 million of Ports Authority bonds.
Pagan said the GDB had $400 million of debt maturing in 2014
and had no plans to take on more, but was instead focused on
paying down its loans.