Puerto Rico plans to issue about $2.86 billion in general obligation bonds in March, the Government Development Bank said on Tuesday, a deal that could have important implications for the $3.7 trillion municipal bond market.
Jose Pagan, the interim president of the GDB, said the bond sale—the first debt sale by the cash-strapped U.S. territory since August—will include about $390 million in new money.
All three Wall Street ratings agencies cut Puerto Rico's credit rating to junk status this month partly on fears that it would struggle to finance its deficit by issuing new bonds.
The island has outstanding debt of about $70 billion—nearly four times that of bankrupt Detroit—and its economy has been shrinking almost continuously since 2006.
The commonwealth's bonds make up about 2 percent of the $3.7 trillion municipal bond market and are popular with investors because they are exempt from federal, state and local taxes.