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Fiscal board OKs debt refinancing, borrowing for 3 more towns


Bayamón City Hall

By The Star Staff


The Financial Oversight and Management Board for Puerto Rico is allowing three island municipalities to borrow and refinance some $73 million.


In a letter made public Monday, the oversight board allowed the city of Bayamón to issue a private offering of $17.3 million in debt refinancing.


The offering will help refinance the balloon payment of the municipality’s existing general obligation (GO) note of 2014. The remaining proceeds will be used for fees and expenses associated with the transaction. The proposed debt transaction provides for an interest rate option of either: a fixed rate of 5.70% or a variable rate of Prime Rate plus 1.50% and subject to a “floor” of 4.75%. Upon transaction closing, the municipality must select the interest rate option.


Bayamón received $20.6 million in total funds from the 2014 notes, of which $17 million is currently outstanding. “Since the proposed Debt Transaction will refinance the 2014 Note, the Municipality’s debt levels will not increase,” the board said. “Furthermore, the Oversight Board’s analysis demonstrates the Municipality has sufficient repayment capacity through forecasted CAE tax collections to service the debt.”


The oversight board also gave the green light to a debt transaction for the Municipality of San Sebastián, issuing its GO bond of 2022 to the U.S. Department of Agriculture Rural Development (USDA) to refinance the Municipality’s existing USDA GO bond anticipation note of 2016 totalling $1.5 million, which is the principal amount outstanding under the 2016 BAN.


The proposed debt transaction bears interest at a fixed rate of 2.50% with annual principal and interest payments and will not result in additional debt.


The oversight board was more careful about approving three debt issues for the municipality of Carolina.


The first entails a request to issue a municipal GO note of $15.1 million to refinance some 2017 GO notes. The note is structured to fully amortize over a seven-year term with annual principal payments and semi-annual interest payments. The terms of the note offer a choice between fixed rate or variable rates of interest of either a fixed rate of 6.50% or a variable rate of Prime plus 1.50%, with a floor of 4.50%.


The second concerns a request to borrow $15.7 million in municipal GO notes to finance the addition of two new floors to the Hospital San Fernando in the municipality. The construction is projected to cost a total of $22.7 million, requiring Carolina to fund the additional $7 million from operating revenues.


The note is structured to fully amortize over a seven-year term with annual principal payments and semi-annual interest payments. The terms of the note offer a choice between fixed rate or variable rates of interest, either a fixed rate of 6.50% or a variable rate of Prime plus 1.50%, with a floor of 4.50%.


The third consists of a request for a revolving credit facility, not to exceed $25 million, to advance funding for repairs and permanent work projects eligible for reimbursement under the Federal Emergency Management Agency (FEMA) General Public Assistance (PA) program over the 22-month draw period before converting to a seven-year amortizing note with annual principal payments. The facility will be used to fund the 90% FEMA portion of eligible projects, and the municipality will be responsible for the remaining 10% costs and expenses related to PA program projects. Upon receiving reimbursement amounts from the PA program, the facility requires mandatory repayment of any outstanding advances with 100% of the proceeds received from FEMA.

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