Puerto Rico avoids default, pays $1.3 billion debt; Puerto Rico G.O. bond prices rise a touch

By Sheri Kasprzak

New York, July 1 – Puerto Rico narrowly avoided defaulting on general obligation bonds, short-term debt and a debt service payment for the Puerto Rico Electric Power Authority Wednesday, market sources said, and in the process, prices on the commonwealth’s G.O. bonds rebounded slightly.

The island’s 8% of 2035s, one of the most actively traded G.O. bonds over the past week, were trading at 69.225 with a 12.123% yield to maturity, coming off a high of about 70 during the session. The 8% 2035s were seen trading in the mid-60s at the beginning of the week.

Many market insiders were concerned the commonwealth would be unable to pay $660 million of G.O. debt, $415 million for the electric power authority and a $245 million bank loan.

The PREPA payment had been in doubt, but most of the authority’s bonds are wrapped by bond insurance.

Among the other Puerto Rico bonds actively traded Wednesday, the 5% 2041 G.O. bonds were seen at 58.525 with a 9.236% yield to maturity after trading as high as 61 during the day.

Yields rise as much as 5 bps

Looking to the broader market Wednesday, yields on top-rated municipals were seen higher by as much as 5 basis points as new-issue action wound down ahead of the Independence Day holiday. The market is closed Friday.

It was a light session for new issues, but the market was keeping an eye on the volatile situation in Puerto Rico.

Munis were also negatively impacted by a weaker Treasuries market Wednesday. The 30-year Treasury bond yield rose by 9 bps and the 10-year note yield by 8 bps on word that Greece could be close to an agreement with its creditors and on strong private-sector jobs data.

Tallahassee sells energy bonds

Heading up the light primary action, Tallahassee, Fla., offered $94,615,000 of series 2015 energy system refunding revenue bonds.

The bonds (Aa3/AA/) were sold through senior manager RBC Capital Markets LLC.

The bonds are due 2016 to 2032 with 3% to 5% coupons and 0.57% to 3.22% yields, said a pricing sheet.

Proceeds will be used to refund the city’s series 2005 energy system bonds.

Indiana Finance brings debt

In other new-issue action, the Indiana Finance Authority priced $92,375,000 of series 2015C taxable motorsports improvement lease appropriation bonds.

The bonds (Aa2/AA+/AA+) were sold through senior manager BofA Merrill Lynch.

The bonds are due 2016 to 2031 with a term bond due in 2035. The serial coupons range from 0.916% to 4.529% and all priced at par. The 2035 bonds have a 4.807% coupon and priced at par.

Proceeds will be used to finance improvements to the seating, technology, fan experience and track at the Indianapolis Motor Speedway.

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