Puerto Rico Electric bonds sell at high yields
Aug 7 (Reuters) - Puerto Rico Electric Power Authority on Wednesday sold $673 million of revenue bonds at tax-free yields of as much as 7.12 percent in the Caribbean island's first municipal bond deal in more than a year that was clouded by Detroit's bankruptcy case.
The bonds sold by Puerto Rico's sole electricity provider were priced to yield between 6.73 percent and 7.12 percent on maturities ranging from 2030 to 2043, according to a pricing sheet from lead underwriter Morgan Stanley & Co.
The Baa3-rated deal's top yield of 7.12 percent on the 30-year maturity with a 7 percent coupon far exceeded yields of 4.28 percent on 30-year, AAA-rated general obligation bonds at Tuesday's closing. Baa GO bonds closed at 5.46 percent on Tuesday, according to Municipal Market Data.
Demand for the deal, which underwriters enlarged from $600 million, was strong but stung by Detroit's bankruptcy filing last month that is forcing shaky issuers such as Puerto Rico to pay higher yields, according to Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management.
"The spreads they are being forced to pay are off the charts," Heckman said. "Puerto Rico has very severe debt levels. They have higher per capita debt levels than any U.S. state."