Puerto Rico's House clears way for $2.95 bln bond deal
March 10 (Reuters) - Puerto Ricos House of Representatives
approved legislation Tuesday to allow for automatic adjustments
to a tax on oil that would help ensure sufficient revenue to pay
back a bond deal of as much as $2.95 billion expected by early
April.
The measure was approved by the Senate last week and is
expected to be enacted quickly by Gov. Alejandro Garcia Padilla.
Puerto Rico needs to sell the bonds to improve its liquidity
position outside of financial markets for up to two years while
it pushes fiscal and economic reforms.
Lawmakers agreed to ensure that investors in the deal would
have sufficient coverage by including a clause to hike the oil
tax if it failed to raise $325 million annually to make the bond
payments. If oil tax revenue surpasses expectations, the tax
rate could be adjusted downward.
The legislation calls for the Treasury secretary to certify
the amount of money raised by the tax by March 31 of each year.
The adjustment would then be made effective on the following
fiscal year starting July 1. The first adjustment will take
effect July 1, 2017, according to the bill.
Lawmakers inserted stronger anti clawback language
protecting the oil tax revenue from being redirected for other
uses. The legislation extends a general obligation
constitutional guarantee for the bonds and allows investors to
sue in New York state courts for any claim arising from the bond
deal.
The 68 percent oil tax hike backing the deal raises the tax
on a barrel of oil to $15.50 from $9.25 and takes effect on
March 15.
It is unpopular and comes during an austerity drive this
year that cut government spending by $1.4 billion. Most of the
proceeds from the deal will be used to repay a $2.2 billion GDB
loan to the Puerto Rico Highways Transportation Authority
(HTA).
The legislation aims to transfer the GDBs $2.2 billion loan
to the HTA to the Puerto Rico Infrastructure Financing
Authority, along with the means to pay for it via revenue
produced by hikes in the petroleum tax. The oil tax hike would
also be used to support HTA operations.
The legislation has been an uphill battle for the
administration, with the governor calling a special session last
December after lawmakers refused to approve the tax during the
ordinary legislative session by a single vote in both chambers.
(Editing by Edward Krudy and Ken Wills)
((edward.krudy@thomsonreuters.com))
Keywords: USA PUERTORICO/BONDS
