NEW YORK, March 23 (Reuters) - Puerto Rico’s government has tasked former IMF employees to help move the U.S. territory to more rigorous financial disclosure standards typically used by sovereign nations to make them more appealing to buyers of emerging-market debt.
Investors have been calling for consolidated financial reporting across all government entities, including the shaky pension system, that would give a more accurate picture of Puerto Rico’s liabilities and cash needs. The U.S. commonwealth is expected to sell $2.95 billion of bonds in May.
The increased flow of information could mirror an International Monetary Fund Article IV mission reporting on a member country and lead to more regular disclosures, one hedge fund investor, who asked not to be named, said.
“That’s the feedback that we and a lot of other investors have given them,” said the investor, who holds Puerto Rico’s government debt. He said that without those elements, it would be “a lot harder for them to raise money.”
Puerto Rico’s Government Development Bank (GDB) confirmed it had hired a consultancy firm with former IMF staffers but declined to name the firm. Todd Hagerman, head of investor relations at the GDB, said the disclosures would align Puerto Rico with distressed sovereigns.
“If you were to look at any of the troubled sovereigns, whether its Spain, Portugal, Argentina, they all utilize that format in terms of their financials,” said Hagerman.
In striving to approximate IMF standards, Puerto Rico would be unique among issuers in the municipal bond market where relatively lax disclosure and accounting practices have meant the island has not had to be as forthcoming with information.
Accounting standards vary among muni issuers, who provide far fewer details than in other markets.
As a U.S. territory, Puerto Rico does not have access to IMF borrowing, but mirroring IMF standards could boost investor confidence, especially at a time when talk of a default by the island’s lawmakers has raised concerns.
As well as Article IV reports, the IMF also advocates more regular and deeper disclosure practices described in the IMF’s data dissemination guidelines. Hagerman did not say which IMF standards Puerto Rico would follow. (Reporting by Edward Krudy; Editing by Alan Crosby)