UPDATE 3-Puerto Rico looks to borrow amid financial turbulence
By Kanika Sikka and Lisa Lambert
Feb 11 (Reuters) - Puerto Rico said on Tuesday it plans to issue general obligation bonds to refinance debt and ease its liquidity crunch, but the island did not offer details as to the timing or how much debt it plans to sell.
The U.S. territory, which has $70 billion in tax-free debt outstanding, is mired in a multi-year recession. It has been downgraded to junk status by all three major U.S. credit rating agencies in the last week and is struggling to avoid default.
"We have completed significant measures in the past month to improve our fiscal health and are ready to access the market with a new issuance of GO bonds," David Chafey, chairman of Government Development Bank for Puerto Rico, said in a statement.
The statement did not specify when Puerto Rico would sell bonds or how much it planned on selling. Barclays, RBC Capital Markets and Morgan Stanley have been named as lead underwriters. The issue would be the first time since August the territory has tapped the municipal market.
A source familiar with the deal said Puerto Rico needs to raise about $2.3 billion, which would allow it to refinance some variable-rate bonds, a $290 million outstanding GO bond, and more than $1 billion in debt service restructuring, as well as borrow $100 million in new money. Hedge funds are expected to show the biggest interest in the deal.
Puerto Rico Governor Alejandro Garcia Padilla said on Monday that he had asked the legislature for approval to borrow up to $3.5 billion in general obligation bonds.
A spokesperson for the territory said specifics of the sale would be announced during its quarterly webcast, which was rescheduled to Feb. 18 from this Wednesday - an indication that the sale will take place toward the end of the month. Continuación...