Puerto Rico's public agencies, also struggling in the capital markets, have taken steps as well, said Treasury Secretary Melba Acosta. For example, water rates were hiked 60 percent to bring in $300 million to $400 million in order to assure holders of bonds guaranteed by those revenues.
David Chafey, head of the development bank, said he's received visits from investors who are looking to lend money via private placements. He declined to identify them or say how many but suggested the lending costs were higher than Puerto Rico wants to accept.
"The ideal is to go back to the capital markets," Chafey said. "But we will do that when market conditions and spreads are what they should be."
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Originally, the island had hoped to borrow more than $2 billion this fiscal year. But Chafey said that through budget cuts, Puerto Rico has reduced its borrowing needs to between $500 million and $1 billion, and it would like to borrow "sometime before June 30."
If need be, Chafey said, the development bank can take other measures and not borrow any money at all this year. He pointed to a liquidity cushion in the form of the bank's $2.7 billion investment portfolio, which is made up of liquid assets such as Treasurys and mortgage-backed securities, with an average duration of three years. That gives Puerto Rico "breathing room," Chafey said.
Most of Puerto Rico's $70 billion in debt is publicly traded, and some of it has fallen in value as investors grow increasingly worried about the island's ability to pay it back due to years of recession or little-to-no growth.
Puerto Rico's debt is held in more than 70 percent of all municipal bond funds in the United States, due in large part to the fact that it carries a triple exemption: Interest paid by Puerto Rico is not subject to U.S. federal, state or local taxes.