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GDB Ups Yearend Bond Issues By $614 Million


November 1, 2001
Copyright © 2001 CARIBBEAN BUSINESS. All Rights Reserved.

Subject to market conditions, the Government Development Bank (GDB) intends to increase its upcoming bond issue for the Puerto Rico Energy & Power Authority (Prepa) to $1 billion and for the Puerto Rico Highways Authority to $1.2 billion, in an effort to place both issuances in stateside financial markets before the end of the year.

Jose Pagan, GDB executive vice-president in charge of financing, said the Prepa bond issue—the first expected to go before the capital markets—will raise $500 million in new money and an additional $500 million for refinancing existing debt. Originally, GDB President Juan Agosto Alicea had told CARIBBEAN BUSINESS that the Prepa issuance would total $800 million, of which $300 million was for refinancing.

According to Pagan, a minimum 5% debt-service saving is anticipated, which represents $25 million up front saved by Prepa. The bank syndicate that will handle the issuance includes Goldman Sachs/ FirstBank as senior manager, and Bank of America/ Oriental Financial Group and UBS PaineWebber as co-senior managers, he said.

Bond proceeds will go to capital expenditures in Prepa’s transmission & distribution lines as well as in its energy production plant.

GDB has also increased its Puerto Rico Highways Authority (PRHA) upcoming bond issue from a proposed $786 million announced earlier (CB Oct. 11) to $1.2 billion. The $414 million increase will be distributed equally between new financing and refinancing of existing debt. The largest chunk—$250 million—is for constructing the Urban Train, and the rest is for the highways program.

Pagan said ideally the PRHA bond issue will also go to market before yearend; otherwise, early next year. Senior manager for the bond issuance is Salomon, Smith Barney, while co-senior managers will be Lehman Brothers/ BBVA Capital Markets and Morgan Stanley/ Popular Securities.

Pagan explained that while GDB is certain of the amount of new financing it will be floating, market conditions determine how much would finally be obtained for refinancing existing debt. "Our aim is to save 5% minimum in all refinancing. If we can get more, that’s even better. But we will not refinance if we are not ensured the minimum goal we have set," Pagan said.

A third bond issue—$850 million for the Public Buildings Authority, of which $600 million is new financing—will probably not go to market until early next year, said Pagan.

The local market will see a $250 million Public Finance Corp. bond issue, which will be used to pay off government agencies’ credit lines with GDB. Santander Securities has been selected senior manager of that issue, expected to be available in the local market between the end of the month and December.

A $96 million private-placement under the Qualified Zone Activity Funds will be brought out by yearend. Pagan said the private-placement funds, which the federal government subsidizes to inject money into school repairs & expansions as well as curriculum improvement, could also include software purchases. Senior manager for this fund is Bank America/Oriental Financial Group.

This Caribbean Business article appears courtesy of Casiano Communications.
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