By The Star Staff
The Financial Oversight and Management Board has settled an alleged claim of about $601 million in obligations owed by the jPuerto Rico Ports Authority to the Government Development Bank (GDB)-Debt Recovery Authority (DRA), as successor entity to the GDB, a step that paves the way for development of key San Juan port infrastructure.
Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials) Executive Director Omar Marrero Díaz and Ports Authority Executive Director Joel Pizá Batiz made the announcement in a recent statement. The obligations owed are related to financings that the GDB made to Ports in 2008, 2011 and 2014, secured in part by a pledge of Ports’ revenues and mortgages on certain Ports assets, including Piers 11 to 14 in the San Juan Bay Cruise Terminal.
The settlement of the obligations is critical in paving the way for Puerto Rico to complete the development of the San Juan Bay Cruise Terminal public-private partnership (P3) project, which aims to transform Puerto Rico into the Caribbean’s main cruise ship destination by modernizing, repairing and expanding nine docks in San Juan to receive larger vessels and more passengers.
The P3 project will accelerate completion of important capital improvement works needed to enhance the performance and safety conditions of the San Juan cruise ship piers. Increasing the number of cruise ships and tourism is expected to have a positive effect on Puerto Rico’s economy and further spur private infrastructure investment and job creation in Puerto Rico.
Elimination of the obligations also facilitates a private-sector project to develop a new large area of entertainment, culture, sports and gastronomy, Bahía Urbana, that will offer a welcoming framework to Old San Juan for local and foreign visitors and the new “Mega Yacht Marina” in piers 9 and 10 operated by Safe Harbor Marina.
The settlement of the obligations will eliminate nearly all of Ports’ long-term debts, allowing Ports to focus on its main objective of developing and promoting Puerto Rico as a transportation center with world-class air and maritime services.
Under the proposed settlement, some $601 million in obligations asserted by the DRA will be exchanged for a one-time payment of $320 million, of which up to $40 million may be paid in the form of investment securities at the DRA’s option, resulting in a discount of around 47%. The proposed settlement is expected to close before Jan. 31.
“The Ports settlement recently approved by the Oversight Board is the result of extensive negotiations and will facilitate the critically important P3 Project, Bahía Urbana and the Mega Yacht Marina,” Marrero Díaz said. “The cruise line industry has always been an important component of the island’s economy, but at this moment, we can’t compete on a large scale with other jurisdictions that are being transformed to attract more and larger ships with better port facilities. The proposed settlement agreement with the DRA and the execution of the P3 project will facilitate the infrastructure and modernization needs of Ports and make Puerto Rico a premier cruise ship destination.”
The AAFAF chief added: “This settlement represents an important achievement by AAFAF and Ports toward improving Ports’ financial situation and continuing a path of fiscal responsibility for the benefit of the people of Puerto Rico.”
“This settlement is evidence of our focus on finding responsible solutions, keeping the welfare of all stakeholders as our top priority,” Marrero Díaz said.