SAN JUAN, Jan 29 (Reuters) - The Puerto Rico House of Representatives approved a bill on Thursday authorizing a government bond issue or other borrowing of up to $225 million for public works projects across the indebted island.
The Treasury secretary can negotiate government-backed bonds with any bank or investment firm, but because of its financial troubles Puerto Rico has been largely reliant on hedge funds for funding.
Puerto Rico is struggling with a total debt load of over $70 billion. It is in the process of restructuring its power authority PREPA which could possibly involve a writedown to PREPA’s $9 billion in debt.
“We approved this measure so that we can invest state resources and money into our communities and in economic development initiatives,” said House Finance Committee Chairman Rafael “Tatito” Hernández in a press release.
Puerto Rico is currently trying to organize a much larger $2 billion debt sale. It badly needs the funds to stabilize its finances. The Government Development Bank (GDB), Puerto Rico’s financing arm, said liquidity dropped 30 percent to $1.09 billion last month compared with November.
The $225 million will be used to cover the cost of public works, acquisition of land necessary to undertake the projects for a number of public works projects, the administration and management of the projects as well as the costs of the sale of bonds and notes issued.
House spokesman Oliver Otero said the measure would now move on to the Senate for its consideration.
The bill was originally presented last June by the administration of Governor Alejandro García Padilla and was approved without public hearings. The bill originally called for a $60 million bond issue. It was amended Thursday to increase the amount to $225 million.
Another amendment allows investors to sue Puerto Rico in New York or U.S. federal courts in the event of a default. (Reporting by Reuters in San Juan; Writing by Edward Krudy; Editing by Lisa Shumaker)