* Puerto Rico's new governor readying pension changes
* Puerto Rico debt risks "junk" ratings - official
* Public pension reforms might set stage for bond deals
Feb 14 Puerto Rico's new governor will propose
in coming weeks overhauls of the Caribbean island's severely
underfunded public pension systems, which might set the stage
for Puerto Rico bond sales, a top finance official said on
A big seller of bonds in America's $3.7 trillion tax-free
market, Puerto Rico pays the highest rates of any big issuer,
partly because of a weak economy, chronic budget deficits and
unfunded pension liabilities of $37.3 billion.
Gov. Alejandro Garcia Padilla is analyzing alternatives
meant to bolster the finances of the government's pension funds,
Government Development Bank President Javier Ferrer told
reporters on Thursday.
"Puerto Rico will get a downgrade of our credit rating, if
we do not act to resolve our fiscal situation," Ferrer said. "A
downgrade to a junk rating will result in a chain of events that
will have a significant impact to Puerto Rico. We are doing all
we can to avoid that."
In December, in an action affecting $38 billion of debt,
Moody's Investors Service slashed Puerto Rico's credit rating by
two notches to Baa3, just slightly above non-investment grade,
with a negative outlook.
Ferrer declined to discuss the pension alternatives, saying
the governor would announce the plan shortly and reiterating the
Puerto Rico government is ready to make tough decisions to get
its financial house in order.
Once the pension reform, which will require legislation, is
enacted, Ferrer said he hoped to return to the bond market this
The GDB will refinance general obligation issues to try to
get better rates and put off some $700 million in interest
payments this year.
The bank, which acts as the U.S. commonwealth's fiscal
agent, also wants to take out $2 billion in interim financing it
has with the Puerto Rico Highways and Transportation Authority,
according to Ferrer.
The later issue will require not just pension reform but
increased sources of revenue, Ferrer said. While toll hikes are
under consideration, there are also other alternatives being
analyzed, he added. The administration has already said it would
raise water and electricity rates.
"It's on my wish list," Ferrer said, when asked whether the
issue would go to market before the June 30 close of the current