May 9 The president of Puerto Rico's Government Development Bank on Thursday denied a news report that the Caribbean island's highways authority might default on a bond payment.
Dismissing the report as inaccurate, the development bank's president, Javier D. Ferrer, said, "The Puerto Rico Highways & Transportation Authority will not default on the payment due on its bonds payable on July 1."
The development bank is the fiscal agent for the heavily indebted island, a territory of the United States.
"The funds are on deposit with the trustee and will be paid to bondholders as always. The indenture is structured as a gross pledge, which requires that monies generated by the (authority) are first used to pay debt service on its outstanding bonds," Ferrer said.
He was reacting to an article published by newspaper El Nuevo Dia that the roads authority could default as soon as next week. The newspaper said the agency owes bondholders about $355.1 million by June 30, with some payments due on Monday.
A big, popular issuer of muni bonds, Puerto Rico was stung in recent months by bond downgrades by three leading Wall Street credit-rating agencies. Each knocked its credit rating to near junk-bond status, pointing in part to an economy sapped by recession. Further ratings cuts are possible.