DEBTWIRE BROADCAST
PUERTO RICO ON TRACK FOR MAJOR DEFAULT
Debtwire’s team of journalists and analysts will discuss the anticipated default
of several major Puerto Rican entities come 1 July 2016. | 23 June 2016
Puerto Rico Webinar | 23 June 2016
AGENDA
1. Opening Remarks: Paul Greaves, Managing Editor
[email protected]
2. The Debt: Greg Clark, Head of Municipal Research
[email protected]
3. The Market: Andrew Scurria, Senior Reporter
[email protected]
4. The Politics: Xavira Neggers Crescioni, Senior Reporter
[email protected]
5. Q&A
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Puerto Rico Webinar | 23 June 2016
WHERE THINGS STAND

Puerto Rico Management, Oversight and Economic Stability
Act (PROMESA)
Passed by House, Senate considering

Negotiations with the GDB
Negotiations between the Government Development Bank for
Puerto Rico (GDB) and certain general obligation (GO) and COFINA
(Sales Tax Financing Authority) bondholders have collapsed

Moratorium challenged
National Public Finance Guarantee Corp. filed in Puerto Rico
Certain GO bondholders filed in New York

July 1
USD 1.9bn in debt service coming due
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Puerto Rico Webinar | 23 June 2016
THE DEBT

1 July debt service coming due
Breakdown of how much is due and from which entities
Likelihood of default on each one (see next slide)
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Puerto Rico Webinar | 23 June 2016
PUERTO RICO DEBT SERVICE DUE 1 JULY 2016
Issuer
1 July Principal and
Interest Payment
USD (000)
Security
Comment
TAX-BACKED AND OTHER NON-UTILITY DEBT
Commonwealth has stated repeatedly that a full debt service payment will not be
made. Most likely scenario is that it will pay interest only. Other than for 2014 Series
A bonds, the structure of which provides for payment of interest only until FY21,
detail of principal and interest as discrete items is not readily available.
Commonwealth of Puerto Rico
General Obligation
779,958
Puerto Rico Public Buildings Authority
Puerto Rico Infrastructure Financing Authority
Government Development Bank
Commonwealth Guaranty
Rum tax
Expected to be treated in the same way as general obligation bonds.
Already in default.
Already in default.
Puerto Rico Public Finance Corporation
Commonwealth Appropriations
177,285
77,056
9,873
1,423
Puerto Rico Highway & Transportation Authority
Fuel-related taxes and motor vehicle fees
232,564
Debt service reserve has not yet been used to pay debt service. Debt service on 1 July
will be paid, possibly by partial depletion of the reserve.
Puerto Rico Convention Center District Authority
Hotel Tax
20,830
Although the hotel tax revenues that have paid debt service in the past are now
being clawed back, the debt service reserve should be adequate to make the 1 July
debt service payment.
Employees Retirement System of Puerto Rico
Employer Contributions
13,877
Full payment on 1 July expected, as commonwealth is considered unlikely at this
time to take any action that would prompt concern about its ability to pay pensions.
Puerto Rico Industrial Development Company
Bonds are payable primarily from rental income on
industrial properties built by PRIDCO and leased to
private firms. Debt service reserve is equal to
maximum annual debt service.
12,719
Given that the debt service reserve has not been used to pay debt service, full
payment on 1 July is expected.
Puerto Rico Highway & Transportation Authority
Toll revenues from Teodoro Moscoso Bridge
10,474
As of 31 December 2015, the USD 8m debt service reserve for these bonds had not
been used to pay debt service. Payment in full expected on 1 July.
Puerto Rico Municipal Finance Agency
Payable from MFA revenues and commonwealth
appropriations. Commonwealth also has moral
obligation to restore draws on the debt service reserve.
7,577
Although the MFA is one of the commonwealth's more opaque issuers, there has
been no indication that the reserve fund has been used to pay debt service. In
addition, the MFA has been excluded from commonwealth restructuring efforts.
University of Puerto Rico – University Plaza Project
Lease payments made by UPR.
Subordinate to other UPR bonds.
4,009
Coverage of all UPR debt was 2.86x as of 30 June 2015. University management
however has concluded that liquidity and other risks raise substantial doubt as
to the ability of hte University to continue as a "going concern".
No indication however that 1 July debt service payment will not be made.
Already in default.
UTILITY/ENTERPRISE DEBT
Puerto Rico Electric Power Authority
Electric Revenue
423,895
As occurred with the 1 January 2016 debt service payment, bond insurers and
creditors are likely to purchase new PREPA securities and/or provide bridge loans in
order to prevent a 1 July payment default.
Puerto Rico Aqueduct and Sewer Authority
Water and Sewer Revenue
147,580
PRASA revenue bonds expected to be paid in full on July 1. Guaranteed bonds
issued for benefit of PRASA expected to be treated in the same way as
general obligation bonds.
GRAND TOTAL
1,919,120
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Puerto Rico Webinar | 23 June 2016
THE MARKET

Trading across the credit complex
Bonds stay resilient as 1 July approaches
Recovery values continue to crystallize
Litigation risk factors

Market mood concerning PROMESA
Fiscal rescue, new transparency
The Senate’s timetable
Impact on 1 July payment
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Puerto Rico Webinar | 23 June 2016
THE POLITICS - 1

Smaller, individual stakeholders have greater
representation
Bonistas del Patio – Favors federal control board
G25 – Against federal control board
Ad hoc group of 21 mutual funds – Wants a voice in the
restructuring

Federal control board set to hit the ground running
Short list of candidates
Once enacted, board is operational
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Puerto Rico Webinar | 23 June 2016
THE POLITICS - 2

Major gubernatorial candidates
Ricky Rossello – New Progressive Party
David Bernier – Popular Democratic Party

The “Tatito” Factor
House Finance Committee Chairman Rafael “Tatito” Hernandez
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Puerto Rico Webinar | 23 June 2016
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