June 19 Some Puerto Rico government workers are threatening to walk off their jobs over a newly enacted budget law, adding to a recent financial whirlwind that is sending yields on the territory's junk bonds to record highs.
The Workers Federation Center, which represents 35 unions, said it selected a date for a strike but would not reveal it in order to surprise the government. It is not clear if the unions will walk off their jobs indefinitely or hold a series of protests.
The two main unions representing workers at the Puerto Rico Electric Power Authority (PREPA) and the Puerto Rico Aqueduct & Sewer Authority (PRASA) held strike votes on Tuesday, and then staged a protest at Plaza Las Americas, San Juan's major shopping mall.
Meanwhile, the 125 union employees of the Government Development Bank walked off their jobs last Friday and continued to strike on Thursday, GDB spokeswoman Betsy Nazario said.
Governor Alejandro García Padilla signed the law Tuesday to declare a fiscal emergency and attempt to address the territory's credit rating downgrades with a plan that includes finding savings in the public workforce. All three Wall Street rating agencies cut the territory's credit score to junk after the territory suffered years of economic and population declines.
"This government wants to take away rights we have acquired through 72 years of struggle," said Angel Figueroa Jaramillo, the president of the Irrigation and Electrical Workers Union (known as UTIER), the main union at PREPA.
He called on residents to stop paying water and electrical bills to show support. Jaramillo said the law would reduce economic benefits by 35 percent, while eliminating seniority and subcontracting clauses in negotiated contracts.
The new law is a positive for bondholders, said Robert Donahue, a managing director at Municipal Market Advisors.
"What is negative is the ongoing threat of strikes and the potential of unrest in Puerto Rico," he said on Wednesday.
Yields on the territory's $3.5 billion junk bonds issued in March have been setting record highs over the last week, as the law wound through Puerto Rico's legislature. Yields move inversely to price.
On Thursday morning they peaked at 9.651 percent, while the price on the debt fell to a record low of 85.25 cents on the dollar. In comparison, yields on top-rated 30-year municipal bonds were 3.38 percent on Municipal Market Data's benchmark scale.
The law is not bondholders' only concern.
Last week, Puerto Rico's government suggested restructuring a $90 million payment to its public pension in order to help close a $320 million budget gap.
On Wednesday, Standard & Poor's Ratings Services downgraded PREPA revenue bonds to BBB- from BBB and placed the rating on CreditWatch with negative implications.
Meanwhile, Doral Financial Corp has sued the territory for a roughly $230 million tax refund. (Reporting by Robin Respaut in New York, Lisa Lambert in Washington and Reuters in San Juan; Editing by Lisa Shumaker)