Puerto Rico Public Finance Aug. 1 bond payments unfunded, uncertain

By Caroline Salls

Pittsburgh, July 16 – Puerto Rico Public Finance Corp.’s series 2011 A and B and series 2012 A Commonwealth appropriation bond trustee said Thursday that it is unclear whether actions will be taken to fund principal and interest payments due Aug. 1 on the bonds, according to a notice from trustee U.S. Bank Trust NA.

Under the trust agreement, Puerto Rico Public Finance is required to “cause the Secretary of the Treasury of the commonwealth to transfer to the trustee, no later than July fifteen (15) of each fiscal year while the bonds are outstanding, funds representing the entire legislative appropriation for such fiscal year,” the notice said.

The trustee said Puerto Rico Public Finance made its initial request in November 2014, as well as subsequent requests, to the Puerto Rico Office of Management and Budget to include the appropriation of funds for the principal and interest payment in the budget for fiscal year 2016.

However, the legislative assembly approved a budget on June 30 that did not include the appropriation, which the trustee said is the sole source of payment of principal and interest on the bonds.

As a result, no funds have been transferred to the bond trustee for the payment, and U.S. Bank said it is unclear whether the legislature will take further action to fund the Aug. 1 bond payments.

The trustee has engaged the Hogan Lovells US LLP to advise it in connection with the bond payment issue.

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