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  • Writer's pictureThe San Juan Daily Star

Traders say appetite is high for restructured Puerto Rico bonds

Former White House Chief of Staff Ron Klain

By The Star Staff

Prominent bond traders say the appetite for restructured Puerto Rico bonds is high even though local bonds have yet to regain an investment grade, stateside media reported over the weekend.

A Bond Buyer report said that through the Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish acronym), the Puerto Rico government brought in five traders to talk about the bonds at its PRNow conference in New York City last week.

“There’s an enormous demand for this product,” Bryce Pickering, head of trading at Barclays, told Bond Buyer.

Pickering’s remarks were made at a panel presentation during the PRNOW 2023 New York Forum late last week. The director of Municipal Products at RBS Capital Markets, Brian Olson; director and senior trading strategist at Bank of America Securities, Elliot Mutch; co-head of Municipal Sales, Trading and Research at Jefferies, Vic Kalaydijan; and Jared Fand, executive director of high yield municipal trading at JP Morgan, shared Pickering’s opinions at the panel moderated by Juan Carlos Batlle, senior managing director of turnaround and restructuring at Ankura.

The U.S. commonwealth ended its central government bankruptcy in March 2022, cutting $22 billion in debt to $7.4 billion.

The PRNOW 2023 New York Forum -- which brought together Puerto Rico and U.S. federal government officials, industry figures and market stakeholders for updated information on the local economy and fiscal recovery for institutional investors, investment banks, law firms and rating agencies -- drew to a close on Friday, with the participation of New York State Governor Kathy Hochul, New York City Mayor Eric Adams and former White House Chief of Staff Ron Klain, to name a few.

The event kicked off its first day with a conversation between Puerto Rico Gov. Pedro Pierluisi Urrutia and Gov. Hochul on the commonalities between the two jurisdictions, both in terms of the challenges they’ve faced over the years and the successful strategies they’ve implemented in overcoming fiscal and economic difficulties.

The Fiscal Matters panel, which took place immediately afterward, set the tone for the rest of the day regarding the concrete steps the Puerto Rico government has taken to exit bankruptcy and ensure future economic development and fiscal discipline.

Secretary of State and AAFAF Executive Director Omar Marrero Díaz moderated the discussion featuring Treasury Secretary Francisco Parés Alicea, Office of Management and Budget Director Juan Carlos Blanco Urrutia, and Labor & Human Resources Secretary Gabriel Maldonado González, who went into depth in their respective fields showing Puerto Rico’s progress in many metrics with up-to-date statistical data. Another one-on-one conversation followed, this time between Marrero Díaz and Ron Klain, former chief of staff under President Joe Biden. Klain shared his views about his experience overseeing the Biden administration’s agenda, which included the American Rescue Plan Act, the Infrastructure Investment and Jobs Act, and the Inflation Reduction Act, laws that have significantly helped Puerto Rico in recent years. Pierluisi gave a keynote speech afterward, declaring that Puerto Rico is a magnet for investment after his administration adopted innovation among its focal points, creating a fertile environment for entrepreneurship and moving forward on reconstruction projects. Pierluisi also stressed that his administration has increased transparency and stability to eventually return to the capital market “with a solid economic foundation.”

One of the event panels discussed disaster funding, providing a narrative about how federal agencies such as FEMA and Housing and Urban Development (HUD) helped Puerto Rico after Hurricanes Irma and Maria in 2017, the 2019 earthquakes, and the COVID pandemic.

Central Office for Recovery, Reconstruction and Resiliency (COR3) Executive Director Manuel Laboy Rivera revealed the latest numbers regarding ongoing reconstruction projects, with the report for the first quarter showing more than 9,300 projects totaling $6.4 billion. Meanwhile, island Housing Secretary William Rodríguez Rodríguez highlighted the recent changes in eligibility for public housing or Section 8, allowing more people on the island to apply for such programs. Next, FEMA Associate Administrator Anne Bink and HUD Deputy Secretary Marion Mollegen McFadden gave their views on how their respective agencies have addressed challenges in Puerto Rico. In a short presentation, Madhu Beriwal, CEO and president of IEM, provided additional perspectives on recovery efforts on the island.

A panel on Puerto Rico’s attraction as an investment destination featured a presentation from Ella Woger, executive director of InvestPR, on how the organization has taken steps to keep Puerto Rico fresh in investors’ minds. Joining Woger was island Economic Development Secretary Manuel Cidre Miranda, Discover Puerto Rico CEO Brad Dean, and Chamber of Commerce president and the honorary consul of Japan in Puerto Rico, Cameron McKenzie.

Dean’s turn on stage proved to be among the most impactful, showing an almost 20% increase in air arrivals from pre-pandemic levels, while visitor spending in Puerto Rico during 2022 amounted to nearly $9 billion.

Two panels featured discussions on public-private partnerships (P3s), a model in which Puerto Rico has become a leader during the past decade. The first was a one-on-one conversation between Lisa Buglione, executive director of the Association for the Improvement of American Infrastructure, and Fermín Fontanés Gómez, executive director of the P3 Authority. The second panel featured three executives whose companies partnered with the government under the P3 model with transformational results. Jorge Hernandez, CEO of Aerostar Airport Holdings, Julián Fernández from Metropistas, and Jan Fomferra, CFO of Global Ports Holding, gave their perspectives on the success of their respective P3s in a discussion moderated by Fontanés Gómez.

The second day of the PRNOW 2023 New York Forum on Friday included a conversation between Marrero Díaz and the new executive director of the Financial Oversight and Management Board for Puerto Rico, Robert Mujica, which was moderated by Forculus Strategic Communications founder and CEO Francisco Cimadevilla.

Both officials adopted a conciliatory tone when asked about the few items left on Puerto Rico’s debt restructuring agenda, chief among them the Puerto Rico Electric Power Authority (PREPA).

Puerto Rico’s electrical utility was also among the subjects of the next panel, arguably among the most awaited in the entire PRNOW event. Deputy Assistant Secretary for Energy Affairs Francisco Berríos Portela moderated a panel featuring Puerto Rico Energy Bureau Associate Commissioner Lillian Mateo Santos; Genera PR CEO and managing director of New Fortress Energy, Brannen McElmurray; the director of the Puerto Rico Grid Modernization and Recovery Team at the U.S. Department of Energy, Agustín Carbó; Quanta Services Senior Vice President B.J. Ducey, and Fontanés Gómez.

The second day’s keynote speech was by Richard Carrión, chairman of the board of directors and former CEO of Popular Inc., with an introduction by Natalia Zequeira Díaz, commissioner at the Office of Financial Institutions of Puerto Rico. Carrión used his banking experience to deliver a big-picture perspective on the island’s ongoing recovery.

“We feel comfortable that Puerto Rico’s economy will do well in the coming years,” Carrión said during his speech.

Vijay Srinivasan, senior vice president of U.S. South Operations at CGI, discussed data management and transparency issues, while New York Mayor Eric Adams spoke of his positive impressions of Puerto Rico and its momentum during his recent visits to the island. He also underscored the deep connection between New York City and Puerto Rico.

“Many people say Puerto Rico is the sixth borough of New York, but I say New York is the San Juan of America,” Adams said.

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1 Comment

May 23, 2023

Somehow I doubt that Elon, Jeff, Mark, Nancy, Mitch and other savvy investors are going to add these to their portfolios. While my electric reliability is better than pre Maria, we will never have a good economy with our outrageous electric bills. So long as our government is hell bent on the renewable energy scam, we will remain systemically poor. The only people who have any interest in the new improved bonds are those that are holding the old unimproved version and want out. And of course the traders and their families what will harvest on the ensuing blood fest. Until Puerto Ricans solve the problem, nothing will change. Hint: Firing every legislator is a good first step.

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