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Puerto Rico On-Line Bond Offering Oversubscribed; Municipal Market's First Comprehensive Electronic Offering

by Dena Aubin

March 16, 2000
Copyright © 2000 DOW JONES & CO., INC. All Rights Reserved.

NEW YORK -- In another example of the Internet's growing influence on the bond market, Goldman, Sachs & Co. used its Web site to help sell $531 million of Puerto Rican general-obligation bonds. The sale was the municipal-bond market's first negotiated transaction via the Internet and followed a spate of similar sales of corporate bonds this year.

Puerto Rico's sale was oversubscribed despite having the most aggressive terms -- or lowest yields -- ever on a Puerto Rican bond issue, according to officials at the Goldman Sachs Group unit, the lead manager. With a top yield of 6.06% in 2029, the securities yield from 0.17 to 0.20 percentage point less than comparable outstanding bonds.

"Clearly this Internet offering created a lot of excitement . . . and had an impact on getting a more aggressive pricing," said Rick Kolman, managing director of municipal underwriting for Goldman.

While dealer orders were entered through a third-party electronic system, most institutional orders were placed directly on the Web site, Mr. Kolman said. Of $800 million institutional orders received, about $500 million were entered via the Web site, he added.

Besides enabling institutions to order bonds online, the Web site also provided access to offering documents, pricing information and instant feedback on the status of orders.

Besides getting lower interest costs, Puerto Rico also saved on printing costs and expenses on presentations to potential buyers, said Lourdes Rovira, president of the Government Development Bank of Puerto Rico.

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