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Moody’s assigns rating to AFI’s $520 million special tax revenue bonds


May 27, 2005
Copyright © 2005 CARIBBEAN BUSINESS. All Rights Reserved.

Moody’s Investors Service assigned a Baa2 rating to the Puerto Rico Infrastructure Financing Authority (AFI, by its Spanish acronym) Special Tax Revenue Bonds Series 2005A and B, late Monday night. The announcement was preceded several days earlier by the downgrading of the Commonwealth’s general obligation bonds to Baa2. The bond issue is guaranteed by the excise tax levied on rum produced in Puerto Rico and consumed in the U.S., which Moody’s considers a reliable revenue source.

AFI was created in 1988 to provide assistance to Commonwealth public corporations responsible for developing infrastructure facilities, such as the Puerto Rico Aqueduct & Sewer Authority.

The report explains the authority’s sale of $520 million will be comprised of approximately $310 million of Special Tax Revenue Bonds Series 2005A, and $208 million of Special Tax Revenue Bonds Series 2005B. "Series A will be used to fund capital projects, and the B series will fund a portion of the Commonwealth’s 2005 General Fund operating budget shortfall," states the report.

The report indicated the revenue source that will be covering the debt was a reliable source that provides good coverage. However, the potential for Puerto Rico to be granted statehood during the life of the bonds was mentioned as a factor since the occurrence could lead to the loss of a prime revenue source and transfers of taxes back from the federal government.

The outlook for the bonds, which indicates the possible direction of future ratings, was negative on account of the Commonwealth’s general obligation rating and the priority claim of general obligation debt and guarantees. The sale date for the bonds is expected to be June 19.

This Caribbean Business article appears courtesy of Casiano Communications.
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