Puerto Rico is working on a plan to strengthen its Government Development Bank (GDB).
According to Bloomberg, the proposal calls for Puerto Rico’s Infrastructure Financing Authority to repay GDB loans by issuing as much as $2.2 billion in bonds backed by petroleum-tax revenues.
Revenue from tax increases on petroleum products, which were instituted last year, would be transferred from the Highways & Transportation Authority to PRIFA.
The overarching goal, lawmakers say, is to bolster the commonwealth’s main bank.
“If we have a healthy GDB, then we have a healthy government,” General Assembly Representative Rafael “Tatito” Hernandez told Bloomberg.
Government wants suit dismissed
Meantime, Puerto Rico is seeking to dismiss a lawsuit filed by two investment firms challenging the commonwealth’s new public corporation restructuring law.
The motions claim Oppenheimer Rochester Funds and Franklin Funds lack standing, and that the law doesn’t conflict with the U.S. bankruptcy code or the Constitution.
“The Puerto Rico Public Corporations Debt Enforcement and Recovery Act” would allow certain public corporations to restructure their debt. The government said its intention was to provide an orderly, statutory process that would enable the corporations to handle their debts fairly while ensuring the continuity of essential services to citizens.
Franklin Funds and Oppenheimer Rochester Funds have large stakes in Puerto Rico Electric Power Authority bonds. The firms, fearing PREPA might soon use the new law, filed their suit last month.
Earlier this week, a hedge fund, BlueMountain Capital Management LLC, also filed a lawsuit. It claims the new law is unconstitutional.
Puerto Rico, similar to U.S. states, is prohibited from filing for bankruptcy protection.
In a statement, the government said it would “vigorously” defend the constitutionality of the law, calling it “rational and reasonable.”
“The Recovery Act is a carefully considered, constitutional law, designed to protect the creditors’ collective interests through an orderly procedure for adjustment of a public corporation’s obligations while enabling it to continue providing critical services to Puerto Rico’s residents and businesses,” said Cesar R. Miranda Rodriguez, Puerto Rico’s secretary of justice.
