• The San Juan Daily Star

San Juan to refinance $30 million in 2014 debt

Financial Oversight and Management Board counsel Jaime El Koury

By The Star Staff

The city of San Juan is going to the markets to refinance some $30 million in debt, according to a Financial Oversight and Management Board for Puerto Rico letter.

After the Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials) sought approval in April, the oversight board agreed last week to allow the municipality of San Juan to execute a private Municipal General Obligation Refinancing Note offering of $30 million to refinance the balloon payment of the municipality’s existing general obligation notes from 2014, totaling $30 million.

The remaining proceeds will be used for fees and expenses associated with the transaction.

The proposed debt transaction will be amortized over a 15-year period with three term and interest rate options: a fixed rate of 6.00% with a 5-year term, a fixed rate of 6.20% with a 7-year term, or a variable rate option of Prime + 1.50% with an interest rate floor of 4.74%.

Each option contemplates a balloon payment due at maturity. The municipality must select the term and interest rate option at closing.

San Juan received $36.1 million in total funds from the 2014 note, of which $30 million is currently outstanding.

The municipality’s debt levels will not increase because the proposed debt transaction refinances the 2014 note. Furthermore, the oversight board’s analysis “demonstrates that the municipality has sufficient repayment capacity through forecasted CAE (special contribution) tax collections to service the debt,” oversight board counsel Jaime El Koury wrote to AAFAF executive director Omar Marrero Díaz.

Also in 2014, the commonwealth executed a $3.5 billion bond issue to help delay bankruptcy, which did not occur.

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