(Adds quotes, background about raising capital, debt rating)
SAN JUAN, Jan 15 (Reuters) - Puerto Rico’s Governor Alejandro Garcia Padilla signed into law a bill raising the tax on petroleum and its derivatives, according to a statement from his office on Thursday, to back a crucial sale of up to $2.9 billion in bonds this year.
The law will help improve the liquidity of the Government Development Bank and make the Highways and Transportation Authority a financially viable public corporation, the governor’s office said. The bill was already approved by the island-nation’s legislature.
The governor said he will introduce proposed amendments to the law aimed at improving it and guaranteeing access to capital markets.
“My administration wants to achieve the best transaction that permits us to continue along the road of responsibility and fiscal and economic recovery,” Garcia Padilla said. “We will continue working together to find the best solution to the challenges we are confronting.”
Garcia Padilla is discussing technical amendments to the bill with lawmakers to market the deal. It is unclear whether all of the changes will be approved, meaning that the bond issue could be less than $2.9 billion.
Lawmakers are expected to approve the amendments this week.
While the legislation authorizes a bond issue of up to $2.9 billion, House Finance Committee Chairman Rafael Tatito Hernandez told El Nuevo Dia newspaper that because the House and Senate won’t approve tying the petroleum tax hike to an automatic inflation increase, the govenrment may only be able to raise $2 billion through the bond sale.
Moody’s rates the commonwealth’s general obligation bonds at Ba2, two notches below investment grade and one step deeper into junk territory than Standard & Poor‘s. (Reporting by Reuters in San Juan; writing by Megan Davies; Editing by Alan Crosby)