Puerto Rico Senate approves sale of $3.5B in bonds

SAN JUAN, Puerto Rico (AP) - Puerto Rico's Senate approved a bill Thursday that authorizes the U.S. territory to sell up to $3.5 billion in bonds as it prepares to re-enter the market next month with a credit rating downgraded to junk status.

The measure is aimed at helping Puerto Rico pay off $70 billion in current debt and boosting the liquidity of its Government Development Bank, which oversees the island's debt transactions.

U.S. investors are closely watching the measure because it could determine whether they are allowed to sue Puerto Rico in a U.S. court if needed.

The island's House of Representatives recently approved a version that would allow investors to do just that, but the Senate amended the bill to limit such action to courts in Puerto Rico and New York. The revised legislation now goes back to the House for debate.

Senate President Eduardo Bhatia said that the bond issue is meant to keep Puerto Rico current with debt repayment and that the money will not be used to finance new projects.

"This decision was taken because of 30 years of irresponsible actions," he said. "We have been trying to keep the boat afloat and prevent it from sinking."

The island of 3.7 million people is entering its eighth year in recession and is fighting a 15.4 percent unemployment rate, higher than any U.S. state.

Senators who voted against the measure said it would force Puerto Rico deeper into debt and warned that the government will likely not be able to pay the money back.

Puerto Rico recently announced that Barclays, Morgan Stanley and RBC Capital Markets would handle the bond sale planned for March.

The island's bonds have been popular with U.S. investors because they are exempt from federal, state and local taxes, and its debt is held by roughly 70 percent of U.S. municipal mutual funds, according to the investment research firm Morningstar.

Standard & Poor's downgraded Puerto Rico's credit one notch earlier this month, while Moody's Investors Service and Fitch Ratings lowered it by two notches.


(Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

Top Stories

  • What Are They Building?
    It's hard not to notice a cluster of construction cranes over Seattle's Roosevelt neighborhood

  • Blockbuster Review
    Michael Medved takes a look at whether the latest Hobbit film is worth your interest

  • Holiday Map
    Find holiday events, Santa photo opportunities, and light displays
ATTENTION COMMENTERS: We've changed our comments, but want to keep you in the conversation.
Please login below with your Facebook, Twitter, Google+ or Disqus account. Existing MyNorthwest account holders will need to create a new Disqus account or use one of the social logins provided below. Thank you.
comments powered by Disqus
Sign up for breaking news e-mail alerts from MyNorthwest.com
In the community
Do you know an exceptional citizen who has impacted and inspired others?
KIRO Radio and WSECU would like to recognize six oustanding citizens this year. Nominate them to be recognized and to receive a $2,000 charitable grant.