Friday, October 31, 2014

Puerto Rico May Raise Petroleum Tax to Back $2.9 Billion of Debt

Puerto Rico lawmakers are working on a plan to allow the island’s Infrastructure Financing Authority to sell as much as $2.9 billion of bonds backed by petroleum taxes to repay loans from the Government Development Bank.

The strategy involves boosting the junk-rated commonwealth’s petroleum-tax rate to $15.50 per barrel after lawmakers increased it to $9.25 last year from $3, General Assembly Representative Rafael “Tatito” Hernandez said in a telephone interview from the island.

The bill, which hasn’t been filed, would transfer the new revenue to the Infrastructure agency, called Prifa, from the Highways & Transportation Authority. Prifa, which has sold bonds backed by rum-tax revenue, would issue debt secured by the petroleum-tax receipts, Hernandez said. Prifa, unlike the roads agency, isn’t eligible to restructure its debt through a law the commonwealth passed in June.

Prifa would take on loans the highway agency owes the GDB, and repay them with the bond proceeds. The Development Bank lends cash to the commonwealth and its agencies to help balance budgets. The plan would boost the GDB’s funds and also raise revenue to support $4.6 billion of highway debt and the new Prifa bonds, Hernandez said.

“It’s going to fix the cash flow for the GDB,” Hernandez said. For bondholders, “their coverage is going to be better after we pass this bill.”

Safeguard Move

Puerto Rico is moving to safeguard its direct debt and strengthen the GDB’s balance sheet after the three largest credit-rating companies cut the U.S. territory to speculative grade in February. The commonwealth and its agencies have $73 billion of obligations, most of which are tax-free nationwide. The island’s economy has struggled to grow since 2006.

The GDB plans to hold a conference call with investors tomorrow. The bank on Oct. 17 released financial documents that included a plan for Prifa to sell bonds to repay money the Highways Authority owes the GDB.

The development bank’s net liquidity as of Sept. 30 was $1.4 billion, or $1.7 billion less than three months earlier, Ted Hampton, a Moody’s Investors Service analyst, wrote in a report this week. Without the planned Prifa sale, the GDB’s available cash would fall to $819 million, Moody’s said.

The depleted cash “could lead the commonwealth and GDB to resort to budgetary payment deferrals and other cash management tools in order to pay debt service, which would increase the risk of default and place negative pressure on the rating of the commonwealth and its related entities,” according to Hampton.

To contact the reporter on this story: Michelle Kaske in New York at mkaske@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Tannenbaum, Alan Goldstein

Bloomberg – Puerto Rico May Raise Petroleum Tax to Back $2.9 Billion of Debt

Puerto Rico May Raise Petroleum Tax to Back $2.9 Billion of Debt

Puerto Rico bill would shore up finances of transportation authority

Puerto Rico's Government Development Bank said on Thursday it had filed a bill to shore up the finances of the territory's highways and transportation authority, which would include boosting the excise tax charged on crude oil to $15.50 per barrel.

The legislation would also pump up funding for the island's infrastructure financing authority so it could assume or refinance certain highway and transportation debts, according to the GDB.

The tax increase is expected to generate an additional $178 million in revenue per year, The GDB said. (Reporting by Lisa Lambert; Editing by James Dalgleish)

Puerto Rico bill would shore up finances of transportation authority

UPDATE 2-Puerto Rico to reform taxes, shore up highway authority

Puerto Rico will begin overhauling its tax system and financially shoring up its highways and transportation authority in coming months, territory officials said on Thursday, as the commonwealth fights to gain budget stability.

The tax reforms are intended to reduce the marginal income tax rate, repeal the gross profit tax enacted in 2013, and shift toward consumption taxes, representatives of Puerto Rico's Treasury and Government Development Bank said during a webcast.

The officials said the reforms will "materially increase" general fund revenue and would likely pass the commonwealth's legislature during the first quarter of 2015.

Under the reforms, which were designed in consultation with KPMG at a cost of $4.7 million, Puerto Rico would replace its 7 percent sales tax with a broad-based goods and services tax. That will evolve into a value-added tax levied at each level of the distribution chain, said GDB President Melba Acosta-Febo.

Acosta emphasized the reforms will ensure the protection of the Sales Tax Financing Authority (COFINA in Spanish) revenue and pledges that back some $16 billion of outstanding COFINA bonds. She added COFINA would remain an "important source of financing."

The new system would eliminate income taxes on individuals earning less than $60,000.

The overhaul will "reform, cap or substitute" revenue from the Act 154 excise tax levied on multinational manufacturers operating in Puerto Rico, Acosta said. Puerto Rico officials met with U.S. Treasury officials this week about making permanent a provisional ruling that U.S. manufacturers can credit the tax against their federal tax burden, she told Reuters.

At the same time, the GDB filed a bill with the legislature on Thursday to raise the oil tax and move some of the finances of the troubled highways and transportation authority to the Puerto Rico Infrastructure Financing Authority (PRIFA).

The legislation would boost the excise tax charged on crude oil by $6.25 per barrel to $15.50 per barrel, starting in March, which would generate an additional $178 million in revenue per year, the GDB said.

Meanwhile, it would give increased funding to PRIFA so it can assume or refinance certain highway and transportation debts and include an optional authorization of up to $2.9 billion in PRIFA bonds, according to the GDB.

More than a fifth of the loans made by the GDB have gone to the transportation authority, and the bill would allow PRIFA to refinance $2.2 billion of those loans as well as the transportation authority's 2013 bond anticipation notes.

The GDB expects to complete the inaugural transaction for the new infrastructure financing this quarter, depending on market conditions and the legislative process, Acosta said.

Still, the island's next bond deal will come from the Puerto Rico Aqueduct and Sewer Authority in early 2015, with the aim of raising enough money to fund several years of its $400-million capital works program, said GDB Chairman David Chafey.

The officials also said the island's electric power authority can make a January debt payment. (Reporting by Reuters in San Juan and Lisa Lambert in Washington; Editing by Chris Reese and Ken Wills)

UPDATE 2-Puerto Rico to reform taxes, shore up highway authority

Puerto Rico Government Looks to Raise Tax on Oil

Puerto Rico government officials said Thursday they are seeking a 68 percent increase in an oil tax to help sell up to $2.9 billion in bonds and strengthen one of the island's largest public corporations amid bankruptcy concerns.

Officials said the move also would help boost cash reserves at the Government Development Bank, which oversees the island's debt transactions, and allow for the refinancing of at least $1 billion in loans made to Puerto Rico's Highway and Transportation Authority.
Legislators filed a measure Thursday that could raise the excise tax on a barrel of crude oil from $9.25 to $15.50, to generate $178 million a year. It also would allow the Highway and Transportation Authority's loan to be transferred to Puerto Rico's Infrastructure Financing Authority, which is authorized to issue bonds.
Bank officials said the government would access the market by March 31.
"The commonwealth is working to make public corporations self-sustaining," bank chairman David Chafey said in a webcast to update investors on Puerto Rico's fiscal situation as the U.S. territory enters its eighth year in recession and struggles with $73 billion in public debt.
Many U.S. investors feared Puerto Rico's indebted public corporations would file for bankruptcy after Gov. Alejandro Garcia Padilla approved a new debt-restructuring law in late June.
Natalia Guzman, the bank's senior vice president, said the bill filed Thursday offers an alternative to restructuring.
The bill "provides a permanent solution to the Highway and Transportation Authority's recurring cash shortfall," she said, noting that the agency has relied on the bank to fund its liquidity needs since 2009.
By December 2012, the agency's debt with the bank reached more than $2.2 billion with no repayment source, the bill states. This in turn affected the bank's liquidity, with the Highway and Transportation Authority's debt representing 21 percent of the bank's loan portfolio.
Legislators say that if approved, the petroleum tax increase will not affect the price of electricity on an island where power bills on average are more than twice those on the U.S. mainland.
The announcement comes the same week in which Moody's warned that the Government Development Bank's liquidity could fall as much as 22 percent if there was no new bond offering to refinance the Highway and Transportation Authority's debt.
By DANICA COTO Associated Press

Puerto Rico Government Looks to Raise Tax on Oil

Thursday, October 30, 2014

OFG Bancorp Rings Closing Bell to Mark 50th Anniversary of Oriental Bank and 20th Year on NYSE

SAN JUAN, Puerto Rico--(BUSINESS WIRE)--OFG Bancorp (OFG) and its subsidiary, Oriental Bank, are marking another milestone in their continuing journey as one of Puerto Rico’s leading and most technologically advanced, service-oriented financial institutions at the forefront of shaping the local banking industry.
Tomorrow, José Rafael Fernández, President and CEO of OFG Bancorp and Oriental Bank, together with company employees and clients, will gather to ring the Closing Bell of the New York Stock Exchange, celebrating the bank’s 50th anniversary and the 20th anniversary of OFG Bancorp’s exchange listing.
“We are proud of the role Oriental Bank has played over the last half century generating value for our clients, investors and the communities we serve,” Mr. Fernández said.

“Oriental Bank stands unique in our market as an established leader in developing innovative solutions, through banking that focuses on accessibility, simplicity and speed, and achieving impressive growth.”

“None of this would have been possible without our talented people, new and long-time customers, supportive investors, and the contribution of our Board members, both present and past. This is no small accomplishment as there used to be dozens of different local, mainland and foreign banks in Puerto Rico.”


“We have already begun working on the next 50 years, extending our legacy of being a bank that acts with our customers foremost in mind, making their lives easier and helping make their financial goals possible.”

“As we continue to execute on our strategies, both retail and commercial clients are increasingly choosing Oriental. We’re excited about what the future holds.”

From the date of its NYSE listing on December 29, 1994 to yesterday, OFG Bancorp’s stock price (adjusted for dividends and splits) has increased more than 650% versus approximately 325% for the S&P 500.

Since its start as a regional savings and loan in Puerto Rico in 1964, OFG Bancorp has advanced to the number two or three market position in most categories through organic growth and its strategic acquisitions of Eurobank (2010) and BBVA’s Puerto Rico operations (2012).

Now, through the introduction of advanced services like FOTOdepósito, People Pay, and Cuenta Libre (“Freedom Account” in English), Oriental Bank is leading the way in technology enhanced banking, making it much easier for customers who prefer to access their accounts via mobile phone, tablet, web, debit / credit card, or ATMs, and want to avoid ATM fees.

Watch the live webcast of OFG’s Closing Bell here at 4 PM ET, Thursday, October 30, 2014: https://www.nyse.com/bell

About OFG Bancorp

Now in its 50th year in business, OFG Bancorp is a diversified financial holding company that operates under U.S. and Puerto Rico banking laws and regulations. Its three principal subsidiaries, Oriental Bank, Oriental Financial Services and Oriental Insurance, provide a full range of commercial, consumer and mortgage banking services, as well as financial planning, trust, insurance, investment brokerage and investment banking services, primarily in Puerto Rico, through 55 financial centers. Investor information can be found at www.ofgbancorp.com.






Contact:


Puerto Rico:

OFG Bancorp

Alexandra López (allopez@orientalbank.com)

(787) 522-6970

or

US:

Anreder& Company

Steven Anreder (steven.anreder@anreder.com)

Gary Fishman (gary.fishman@anreder.com)

(212) 532-3232
OFG Bancorp Rings Closing Bell to Mark 50th Anniversary of Oriental Bank and 20th Year on NYSEnce

Wednesday, October 29, 2014

Puerto Rico's Utility Siblings Prep For Subsidy Fight

Puerto Rico’s water and electric utilities may soon be in a tug of war over subsidies. And no matter the outcome, one thing is certain: there will be no draw. As Puerto Rico has pushed to make its public corporations self-sufficient over the past two years, the financial interdependence of its utilities remains a stumbling block.

While Puerto Rico Aqueduct and Sewer Authority (PRASA) has already lost a subsidy from the commonwealth worth $70 million annually, the entity is now threatened by the likelihood that cash-strapped Puerto Rico Electric Power Authority (PREPA) will pull the plug on the deeply discounted rates it grants to the water utility, according to a recent Debtwire research report.

As it stands PREPA forgoes $42 million a year through preferential electricity rates to PRASA, while staring down a debt restructuring. That figure is set to almost double to $80 million in FY17, a number that if paid in cash would amount to about 17 percent of PREPA’s income before taking into account interest, depreciation and amortization.

When push comes to shove, PREPA – which recently inspired Puerto Rico to pass a measure similar to a bankruptcy law in case it needed to reorganize – could move to end the subsidy in order to improve on its gloomy financial picture. And PRASA, facing its own financial problems, would likely be reluctant, or unable, to pay a higher rate for electricity.
Flag-map of Puerto Rico
PRASA has fared better financially, or at least received less attention than PREPA, in part because of a 68 percent rate increase that boosted its top and bottom line. While the rate hike offered a short-term lift, the company now charges about 60 percent more for water than the national average, which limits its ability to further raise prices. Furthermore, almost 60 percent of the water PRASA produces never gets billed because of loss through aging pipes, theft, or incorrect billing, compared with an average water loss rate of about 16 percent on the mainland.

Compounding the problem, the company has been free cash flow negative for the past five years. With its leaky pipes, PRASA faces another headwind: it’s under a federal mandate to spend almost $400 million to update its system and will need another $1 billion for additional capital projects over the next five years.

To fund its capital expenditures, PRASA will need to issue bonds. But tapping the market won’t be easy with existing junk-rated debt trading at distressed levels and carrying a negative outlook.

For PRASA to continue servicing its existing debt, it will need to set its own rates well above the national average and maintain the preferential electricity rate it receives from PREPA. Likewise, PREPA, already under a bondholder forbearance agreement, may need to scrap the preferential rate in order to reduce haircuts on its own debt as it works on its restructuring.

Both are playing a zero-sum game that neither can afford to lose.

Suneet Chandvani is the head of research for Debtwire Municipals. As an analyst Suneet is a generalist, currently focused on distressed credits in Puerto Rico. He can be reached at suneet.chandvani@debtwire.com

Simone Baribeau is a senior reporter covering US territories, non-profit hospitals, stadium financing, and Florida for Debtwire Municipals. She can be reached at simone.baribeau@debtwire.com.

By Suneet Chandvani and Simone Baribeau
Puerto Rico's Utility Siblings Prep For Subsidy Fight

Saturday, October 25, 2014

Three major nations absent as China launches W.Bank rival in Asia

SHANGHAI (Reuters) - Australia, Indonesia and South Korea skipped the launch of a China-backed Asian infrastructure bank on Friday as the United States said it had concerns about the new rival to Western-dominated multilateral lenders.

China's $50 billion Asian Infrastructure Investment Bank (AIIB) is seen as a challenge to the World Bank and Asian Development Bank, both of which count Washington and its allies as their biggest financial backers.

China, which is keen to extend its influence and soft power in the region, has limited voting rights in these existing banks despite being the world's second-largest economy.

The AIIB, launched in Beijing at a ceremony attended by Chinese finance minister Lou Jiwei and delegates from 21 countries including India, Thailand and Malaysia, aims to give project loans to developing nations. China is set to be its largest shareholder with a stake of up to 50 percent.

Indonesia was not present and neither were South Korea and Australia, according to a pool report.

Japan, China's main rival in Asia and which dominates the $175 billion Asian Development Bank along with the United States, was also not present, but it was not expected to be.

Media reports said U.S. Secretary of State John Kerry put pressure on Australia to stay out of the AIIB.

However, State Department spokeswoman Jen Psaki said: "Secretary Kerry has made clear directly to the Chinese as well as to other partners that we welcome the idea of an infrastructure bank for Asia but we strongly urge that it meet international standards of governance and transparency.

"We have concerns about the ambiguous nature of the AIIB proposal as it currently stands, that we have also expressed publicly."

In a speech to delegates after the inauguration, Chinese President Xi Jinping said the new bank would use the best practices of the World Bank and the Asian Development Bank.

"For the AIIB, its operation needs to follow multilateral rules and procedures," Xi said. "We have also to learn from the World Bank and the Asian Development Bank and other existing multilateral development institutions in their good practices and useful experiences."

PERSONAL LOBBYING

The Australian Financial Review said Kerry had personally asked Australian Prime Minister Tony Abbott to keep Australia out of the AIIB.

"Australia has been under pressure from the U.S. for some time to not become a founding member of the bank and it is understood Mr Kerry put the case directly to the prime minister when the pair met in Jakarta on Monday following the inauguration of Indonesian President Joko Widodo," the paper said.

South Korea, one of Washington's strongest diplomatic allies in Asia, has yet to say it will formally participate in the bank. Its finance ministry said last week it has been speaking with China to request more consideration over details such as the AIIB's governance and operational principles.

"We have continued to demand rationality in areas such as governance and safeguard issues, and there's no reason (for Korea) not to join it," South Korean Finance Minister Choi Kyung-hwan said in Beijing on Thursday after attending a separate regional meeting.

The Seoul-based JoongAng Daily quoted a South Korean diplomatic source as saying: "While Korea has been dropped from the list of founding members of the AIIB this time around, it is still in a deep dilemma on what sort of strategic choices it has to make as China challenges the U.S.-led international order."

The AIIB is expected to begin operations in 2015 with senior Chinese banker Jin Liqun, ex-chairman of investment bank China International Capital Corp, expected to take a leading role.

The memorandum of understanding signed on Friday said authorised capital of the bank would be $100 billion and that the AIIB would be formally established by the end of 2015 with its headquarters in Beijing, state news agency Xinhua said.

Takehiko Nakao, the president of the Manila-based Asian Development Bank (ADB), said the AIIB should function in line with international governance, labour and environmental standards.
"I hope the new bank will adhere to these standards," Nakao told Reuters in a phone interview.

He acknowledged there was an overlap of the AIIB's role with that of the ADB.
"But again, because of very big financing needs of the region it is understandable to have a new idea of establishing a bank," Nakao said, adding: "We will consider the appropriate collaboration after it is really established."

The ADB, created in 1966, offers grants and below-market interest rates on loans to lower to middle-income countries. At the end of 2013, its lending amounted to $21.02 billion, including co-financing with other development partners.

China has a 6.5 percent stake in the ADB, while the United States and Japan have about 15.6 percent each.

(Reporting by Brenda Goh; Additional reporting by Arshad Mohammed, Sonali Paul, Jake Spring, Choonsik Yoo and Rosemarie Francisco; Editing by Raju Gopalakrishnan)
Three major nations absent as China launches W.Bank rival in Asia

Friday, October 24, 2014

Construction Begins on Crowley’s new Commitment Class LNG-Powered ConRo Ships for Use in the Puerto Rico Trade

Yesterday marked a historic moment for Crowley as VT Halter Marine, Inc., a subsidiary of VT Systems, Inc., officially began construction on the first of two liquefied natural gas (LNG)-powered, combination container – Roll-On/Roll-Off (ConRo) ships for Crowley Maritime Corporation’s liner services group. VT Halter Marine and Crowley entered into a contract for the pair of ships in November 2013 and construction began with the first steel plate cutting in Pascagoula, Miss., this morning.

“We have waited with great anticipation for the Commitment Class build program to start,” said John Hourihan, senior vice president and general manager, Puerto Rico/Caribbean liner services. “These new ships will embody superior technology and construction and we are anxious to get them into service for our partners in Puerto Rico.”

“VT Halter Marine is pleased and excited to announce the first steel plate cut which launches the official start of construction for these new LNG ConRo ships. These vessels signify how important the Jones Act is to Americans employed in the marine industry. We are most grateful for Crowley’s continued confidence in VT Halter Marine,” said Bill Skinner, CEO, VT Halter Marine.

The Commitment Class ships have been designed to maximize the carriage of 53-foot, 102-inch-wide containers, which offer the most cubic cargo capacity in the trade. The ships will be 219.5 meters long, 32.3 meters wide (beam), have a deep draft of 10 meters, and an approximate deadweight capacity of 26,500 metric tonnes. Cargo capacity will be approximately 2,400 TEUs (20-foot-equivalent-units), with additional space for nearly 400 vehicles in an enclosed Ro/Ro garage. The main propulsion and auxiliary engines will be fueled by environmentally-friendly LNG. The ship design is provided by Wartsila Ship Design in conjunction with Crowley subsidiary Jensen Maritime, a leading Seattle-based naval architecture and marine engineering firm.

The Commitment Class, Jones Act ships will replace Crowley’s towed triple-deck barge fleet, which has served the trade continuously and with distinction since the early 1970s. These new ships, which will be named El Coquí (ko-kee) and Taíno (tahy-noh), will offer customers fast ocean transit times, while accommodating the company’s diverse equipment selection and cargo handling flexibility – benefits customers have enjoyed for nearly 60 years. El Coquí and Taíno are scheduled for delivery second and fourth quarter 2017 respectively.

Powered by LNG, the Crowley ships will set a new standard for environmentally responsible shipping. LNG is a stable gas that is neither toxic nor corrosive and is lighter than air. It is the cleanest fossil fuel available, netting a 100-percent reduction in sulphur oxide (SOx) and particulate matter (PM), and a 92-percent reduction in nitrogen oxide (NOx). LNG also has the ability to significantly reduce carbon dioxide (CO2), a contributor to greenhouse gas emissions, as compared with conventional fossil fuels.

Designing, building and operating LNG-powered vessels is very much in line with Crowley’s overall EcoStewardship© positioning and growth strategy. The company formed an LNG services group earlier this year to bring together the company’s extensive resources to provide LNG vessel design and construction management; transportation; product sales and distribution, and full-scale, project management solutions.
Source: Crowley

Construction Begins on Crowley’s new Commitment Class LNG-Powered ConRo Ships for Use in the Puerto Rico Trade | Hellenic Shipping News Worldwide

California Toll Road Sells $1.4 Billion in Bonds

The operator of a struggling toll road in southern California sold about $1.4 billion in bonds on Wednesday, capitalizing on a broad decline in yields that has whetted investors’ appetite for riskier bets.
It is the second billion-dollar sale for a toll road this month, after the Texas Transportation Commission’s $1.26 billion bond deal on Oct. 2, and the biggest since Texas sold about $1.45 billion in bonds in March, according to Ipreo data.
The San Joaquin Hills Transportation Corridor Agency, responsible for financing a 15-mile toll road in Orange County, Calif., was able to boost the deal size by 40%, a sign that municipal-bond investors are shrugging off worries about Detroit’s record bankruptcy and Puerto Rico’s economic woes as they pursue bigger returns.
Many toll roads ran into trouble after the 2008 financial crisis, when revenues fell amid declines in traffic. The California agency restructured its debt in 2011 and has hiked tolls every year since 2012 to appease existing bondholders, according to Moody’s Investors Service.
But the historically low yields on ultrasafe government debt and municipal bonds are bolstering the lure of toll-road debt and other riskier types of fixed-income investments. Investors in the recent weeks piled into safer types of debt, driving prices up and yields to fresh lows, amid worries about the pace of economic growth in Europe and in other parts of the world.
Last week, the average yield on municipal bonds hit 2.19%, the lowest level since May 2013, according to S&P Municipal Bond Index. Bond prices move in the opposite direction of yields.
In Wednesday’s deal, the San Joaquin agency priced most of the debt to yield between 4% and 4.45%. Proceeds will go toward refinancing bonds sold to build the highway, which opened in 1996 and runs between the cities of Newport Beach and San Juan Capistrano.
A $1.1 billion chunk of the bond deal is rated triple-B minus by Standard & Poor’s Ratings Services, one notch above “junk” status. Another $294 million part, rated “junk,” was priced to yield between 4.55% and 4.8%.
“With people stretching to get a little more yield, their timing is good,” said Howard Cure, director of municipal research at Evercore Wealth Management LLC, which supervises about $5.4 billion.
Toll roads are rebounding with the economy after the recession caused vehicle use to fall about 3% between 2007 and 2011, according to a report last week by Janney Capital Markets, which upgraded its outlook on the sector.
The San Joaquin toll road was originally proposed as a free highway funded through gas-tax revenues before lawmakers in the 1980s approved a plan to collect tolls to fund construction, billing it as a way to build highways without taxpayer money.
Usage and revenue growth, however, didn’t match projections. After the recession buffeted toll collections, the agency shored up its financial health by renegotiating with bondholders to stretch out some payments and agreeing to maximize toll collections.
The lower interest rate from Wednesday’s sale will allow the agency to slow the rate of toll hikes so they match the rate of inflation, said Amy Potter, the agency’s chief financial officer. “We’ve put together a debt structure that aligns well with how the road has performed,” Ms. Potter said, adding that the new bonds allowed the authority more breathing room to cover debt payments.
The sale leaves the agency with about $2 billion in debt, according to S&P.
Corrections & Amplifications
A $1.1 billion chunk of the toll-road deal is rated Triple-B minus. An earlier version of this article incorrectly said $1.1 million.
Write to Aaron Kuriloff at aaron.kuriloff@wsj.com
By

California Toll Road Sells $1.4 Billion in Bonds

Wednesday, October 22, 2014

Pierluisi Announces That Puerto Rico Families Will Receive Over $13.7 Million in Federal Funding to Reduce their Electricity Bills in Fiscal Year 2015 | Res. Comm. Pedro Pierluisi

San Juan, Puerto Rico—Resident Commissioner Pedro Pierluisi announced today that the U.S. Department of Health and Human Services (HHS) will allocate over $13.7 million to Puerto Rico in Fiscal Year 2015 under the Low Income Home Energy Assistance Program, known as LIHEAP, which helps low-income households pay their electricity bills.  This is a nearly $10 million increase above what Puerto Rico received just two year ago in Fiscal Year 2013.  Because of Pierluisi’s efforts, HHS increased the amount of LIHEAP funding provided to Puerto Rico and the other territories, beginning in Fiscal Year 2014.  As a direct result, Puerto Rico went from receiving less than $4 million per year to now receiving between $13 million and $15 million per year, depending on how much overall funding Congress appropriates for the program.

Under the old formula, approximately 250,000 individuals in Puerto Rico received assistance under LIHEAP.  With the increase in funding, it should be possible to provide assistance to hundreds of thousands of additional island residents.

“Puerto Rico has always been treated unequally under LIHEAP, receiving less than it would if it were a state.  In the 1981 federal law that established LIHEAP, Congress directed HHS to allocate each year, for the five territories to share, no less than 0.10 percent and no more than 0.50 percent of the total LIHEAP appropriation,” said Pierluisi.

“According to the law, the percentage annually allocated by HHS is supposed to be determined on the basis of need in the territories.  However, since the inception of LIHEAP, HHS had provided exactly 0.135 percent for the territories each year, which is just barely above the minimum level authorized by law.  As a result, many low-income families in Puerto Rico have received less assistance than similarly-situated families in the 50 states, or no assistance at all,” added the Resident Commissioner.

Deeply concerned with this disparity, in 2011 Pierluisi began to lead an effort by the territory delegates to persuade HHS to increase the funding provided to the territories to the maximum amount allowed under law—0.50 percent—in light of multiple factors, including the high cost of electricity in these island jurisdictions, where residents pay at least twice the national average.  To support his argument, the Resident Commissioner provided HHS with a significant amount of empirical evidence, including detailed charts and graphs.

This effort ultimately was successful.  In November 2013, HHS called Pierluisi to notify him that the agency had completed its review of his request, and that Puerto Rico and the other territories would receive 0.50 percent going forward.  As a result, Puerto Rico received close to $15 million in Fiscal Year 2014 and will receive almost $14 million this fiscal year, a major increase over what the island previously received.

“HHS acknowledged that, given the level of need, Puerto Rico and the other territories have been significantly underfunded under LIHEAP as compared to the states, and that a funding increase was therefore justified,” said Pierluisi.

“Although Puerto Rico is still not treated equally under this program, we are treated much better than we were before, and this additional funding will help many hard-working families in Puerto Rico afford their electricity bills,” added the Resident Commissioner.

As a result of Resident Commissioner’s efforts, annual funding is nearly $10 million greater than it was previously

Pierluisi Announces That Puerto Rico Families Will Receive Over $13.7 Million in Federal Funding to Reduce their Electricity Bills in Fiscal Year 2015 | Res. Comm. Pedro Pierluisi

Tuesday, October 21, 2014

How a surge in Puerto Rican voters is changing Florida politics

The road to political victory in Florida is not just a metaphor, it's a place: Interstate 4, the busy highway that cuts across the vote-heavy heart of the state from Tampa to Daytona Beach.

And the I-4 corridor, as it's called, now runs through a swing-vote region undergoing significant demographic change.

Puerto Ricans have been migrating by the thousands to the area — part of the largest exodus from their island territory to the mainland since World War II. They currently make up about 10 percent of Central Florida's population, and their numbers continue to grow.
A Pew Research Center report released in August shows that Orange County alone was home to nearly 150,000 Puerto Ricans in 2010, up from 86,583 a decade earlier, out of a total population of 1.4 million. The surge pushed it to No. 3 in a ranking of U.S. counties according to Puerto Rican population; only Brooklyn and the Bronx ranked higher.
"The I-4 corridor is the key to winning Florida: Win the area and you win the election," says Susan MacManus, a political science professor at the University of South Florida in Tampa, pointing out that roughly 45 percent of the state's registered voters live in the Tampa and Orlando media markets.
Yet some Floridians, including politicians, are still trying to figure out how to talk about the newcomers. Because many Puerto Ricans work at Disney World, Floridians dub them "Disney Ricans" or "Mickey Ricans," labels they don't find amusing.
And it didn't go unnoticed when the chairman of the Orange County Republican Executive Committee, Lew Oliver, blamed the "Puerto Rican influx" for a decline in registered Republicans and called the island territory "semisocialist" and a "basket case." Under fire from various groups, Oliver issued an apology, saying his words were taken out of context.


View gallery
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Interstate 4 in downtown Orlando, Florida. (John Coletti/JAI/Corbis)
Interstate 4 in downtown Orlando, Florida. (John Coletti/JAI/Corbis)
The episode highlights the struggle the GOP faces in Central Florida, where more than 300,000 Puerto Ricans are concentrated in a region of 3 million to 4 million people. Though Republicans can still rely on the Cuban vote in South Florida, they're falling behind in the vital I-4 corridor.

The change is part of a broader shift in the Hispanic politics of the Sunshine State. Historically, Cubans in the Miami area have been the majority of the state's Hispanics and have leaned Republican. But that dominance is slowly eroding. Younger Cubans are increasingly turning Democratic, and the swelling Puerto Rican population seems to lean Democratic, too.

Puerto Ricans now number nearly 1 million statewide and represent 28 percent of Hispanic registered voters — closing in on a Cuban population of 1.3 million that comprises 32 percent of Hispanic voters.
With their sharply rising numbers, Puerto Rican voters could tip the balance of the Hispanic vote in the country's third most populous state, a powerhouse battleground with 29 electoral votes.
"No question, the influx of Puerto Ricans has had an impact," says Steve Schale, a Tallahassee strategist who was a senior adviser in President Barack Obama's 2012 campaign and is an adviser to Charlie Crist's gubernatorial campaign. "Until a few years ago, Central Florida was reliably Republican. No more."
The Puerto Rican vote could make a decisive difference in the upcoming presidential election. It may have already done so in 2012, when Obama won the state by 50.1 percent to Mitt Romney's 49.13 percent. The difference was only 74,000 votes, the slimmest margin in the country.
Yet the Puerto Rican vote is no sure thing for the Democrats.
"It's an up-for-grabs community," says Andres W. Lopez, a Harvard-trained lawyer and national Democratic Party fundraiser who lives in San Juan and commutes often to Florida and Washington.
Puerto Ricans who have lived for long periods in the United States tend to register as Democrats, but those who came from the island recently are likely to be more independent and unaffiliated.


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Mi Familia Vota canvassers making sure eligible people are registered to vote and have transportation to the polls in Orlando in 2012. Mi Familia Vota is a national organization working to unite the Latino community and its allies to ensure social and economic justice through increased civic participation. (Sarah L. Voisin/The Washington Post via Getty Images)


Mi Familia Vota canvassers making sure eligible people are registered to vote and have transportation to the polls …



When Republicans and Democrats look at this "up-for-grabs community," they see something they haven't seen before. The new wave of Puerto Rican transplants — unlike the rural people who left the island for factory jobs in New York and otherNorthern cities in the 1950s and 1960s — includes a sizable number of doctors, nurses, teachers, engineers, lawyers, managers and professors. They are upscale and highly educated, and they come to Florida to advance careers and improve lifestyles.
Lopez says many are fleeing the island's dismal conditions — $70 billion in debt, a 15 percent unemployment rate, escalating crime, teacher layoffs and rundown schools. "The lingering images of this year have been the goodbye notes from people you thought would never leave," he says.
"Puerto Rican communities in Orlando, Miami and Tampa differ substantially from their counterparts in New York City, Chicago and Philadelphia," says Jorge Duany, an anthropologist at the Cuban Research Institute at Florida International University. In his research study "Mickey Ricans? The Recent Puerto Rican Diaspora to Florida," Duany finds that the Puerto Rican migrants of the 21st century have more financial resources and are better educated than their predecessors. They tend to live in middle-class and high-end suburban settings, like Coral Gables and Doral in Miami. "The current Puerto Rican experience in Florida is largely unprecedented," he says.
The GOP believes these new immigrants could be its kind of people.
"No party has a lock on Hispanics," says Alex Garcia, the Republican Hispanic Initiatives field director for Florida, speaking specifically about Puerto Ricans. Hispanics favored Republican Jeb Bush in earlier elections, Garcia points out.
In this election cycle, both Republican Gov. Rick Scott and his challenger, Charlie Crist, have Hispanic running mates. Scott recently made his first Spanish-language TV commercial, and the first televised debate between the two candidates — a fractious tit-for-tat on Oct. 10 — was hosted by the Spanish-language Telemundo network.
Both candidates have tried to tailor their message to Hispanic voters. Scott pitches jobs, low taxes and social conservatism (he's against equal marriage and abortion rights, stands that likely appeal to Hispanic social conservatives). Crist emphasizes issues that, according to surveys, rank high with Puerto Ricans and other Hispanics: health care, Medicaid expansion, increasing the minimum wage, immigration reform.


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Democratic gubernatorial candidate Charlie Crist, left, and Annette Taddeo, Democratic candidate for lieutenant governor, right, arrive at the Parras home in Miami, Thursday, Oct.2, 2014.  (Alan Diaz/AP Photo)

Democratic gubernatorial candidate Charlie Crist, left, and Annette Taddeo, Democratic candidate for lieutenant …

One key issue for Puerto Rican voters of various stripes is statehood for their island territory.
As American citizens, Puerto Ricans can visit or migrate to the mainland freely, but those who reside on the island have no voting representatives in the U.S. Congress and are not allowed to vote in presidential elections. Many have migrated to the mainland partly out of frustration that they have no say in Washington.
A bipartisan group, aiming to capitalize on the new visibility of Puerto Ricans in the Sunshine State, launched a movement this month to pressure candidates and elected officials at local, state and federal levels to support statehood for Puerto Rico.
"If you want Puerto Ricans to come out and vote, react to our call today," says Alfonso Aguilar, executive director of the Washington-based Latino Partnership.
Until now, however, Florida Democrats and Republicans have no official stance on the controversial issue.
That underscores something else about Puerto Rican political power: Much of it is still unrealized.
"The role of Puerto Ricans has never translated into economic and political might," says Lopez, the Democratic fundraiser. "Puerto Ricans have a megaphone, yet they are still punching below their weight."
In 2012, when Puerto Ricans had the opportunity to elect one of their own to the heavily Hispanic 9th Congressional District in Central Florida, they didn't field a candidate. Alan M. Grayson, a Democratic former 8th District representative, won the vote.
Perhaps more surprisingly, there is only one Puerto Rican state senator in the Republican-led state legislature in Tallahassee: Darren Soto, a low-key lawyer whose grandfather left the Puerto Rican sugarcane fields decades ago to make a new home in New Jersey. A graduate of Rutgers University and George Washington University Law School, Soto was elected to the Florida Senate at age 29.



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Sen. Darren Soto, D-Orlando, on the floor of the Senate in Tallahassee, Florida on April 24, 2014. (Phil Sears/AP Photo)


Sen. Darren Soto, D-Orlando, on the floor of the Senate in Tallahassee, Florida on April 24, 2014. (Phil Sears/AP …
Soto blames low turnout in the midterm elections and primaries to explain why the legislature has such a small number of Puerto Ricans (there are three in the lower house). But Grayson was elected to the U.S. House in 2012, a presidential election year when Puerto Ricans and other Hispanics in Florida went to the polls in strong numbers.

"Our community is still maturing," Soto says, adding that Puerto Ricans don't have the financial clout to field many candidates and mount major campaigns.
Duany at Florida International University says that while Puerto Ricans have a higher political profile in Florida than ever before, "it hasn't happened yet in terms of representation." They're divided internally, he says, with a significant minority voting Republican —especially those who enjoy higher socioeconomic status.
That trend is most notable in Miami, where Puerto Ricans tend to disperse and settle in higher-income areas rather than banding together in "Little Puerto Ricos" or similar ethnic-centric communities.
What's missing in the Puerto Rican community is "a passion point," says Nelson E. Famadas, a 42-year-old entrepreneur who has spent much of his life moving back and forth from the mainland to the island.
The Harvard-educated Famadas worked at MTV, started a couple of late-night Hispanic-oriented TV shows, moved to San Juan to handle his father's real-estate business and landed back in Miami four years ago. He has since started up a pair of indie radio music and talk shows.
"We should be considered the ultimate swing vote,'' he says. "It's a huge opportunity for both parties. We cannot be taken for granted."
Like many other Puerto Ricans in Florida, he zeroes in on the statehood issue. "We have to speak about political equality, about our human rights. … This issue will be solved, but right now we lack leadership to mobilize people."
"We need to convey the importance of the status issue," Famadas continues. "The question is: Do Puerto Ricans have the same opportunities to succeed while being second-class citizens in a territory? The United States is the poster child for human rights. … How can this issue be still unresolved? How can this issue not unite Puerto Ricans?"
Famadas hopes that rising Puerto Rican influence will eventually present a challenge to both political parties: "What are you doing about the status of Puerto Rico?" he says. "The answer will have to come. We're not exercising our influence yet. But we will."
By Luisita Lopez Torregrosa

How a surge in Puerto Rican voters is changing Florida politics

Monday, October 20, 2014

Puerto Rico mulls $2.5bn debt sale to boost liquidity

Junk-rated Puerto Rico, saddled with a debt load of more than $70bn, wants to transfer a loan of around $2bn the GDB made to the highway authority PRHTA to the island’s infrastructure authority PRIFA. PRIFA would then securitise the debt, backed by dedicated revenues, and sell it to investors, including hedge funds, the sources said.

“The deal is very possible, but hedge funds would definitely have a big role,” said one source, a former government official and finance industry veteran.

“There are many funds willing, able and wanting to buy Puerto Rico bonds.”

The sources were finance industry insiders in San Juan who had been briefed on the matter but were not authorised to talk about it publicly.

The PRHTA deal would also include refinancing $400 million in bond-anticipation notes sold to RBC and may include $200m in variable notes the GDB brought from PRHTA. That would bring the total financing requirement to $2.5bn, the sources said.

A New York-based spokesman for the GDB declined to comment.

Puerto Rico paid a steep price to complete a $1.2bn short-term financing deal last week. It paid an interest rate of almost 8 per cent to borrow from a syndicate of banks until next June. In March it sold $3.5bn of debt in a single 2035 maturity with an 8pc coupon and a yield of 8.727pc.

SAN JUAN: Puerto Rico is working on a bond sale of up to $2.5 billion to boost liquidity at the Government Development Bank (GDB), the financing arm of the struggling US commonwealth, according to sources with knowledge of the deal said on Friday.

Puerto Rico mulls $2.5bn debt sale to boost liquidity

Saturday, October 18, 2014

UBS tells brokers to keep selling risky Puerto Rico funds

UBS AG is sticking with its recommendations that some clients buy risky Puerto Rico closed-end bond funds, despite hundreds of arbitration claims by investors who blame the securities for huge losses, according to an internal document.

UBS told brokers that they may continue to recommend the funds to clients following a $5.2 million settlement last week with Puerto Rico's financial institutions regulator about sales practices involving the funds, according to an Oct. 9 internal memo reviewed by Reuters.

However, brokers "should continue to evaluate investment recommendations in a manner consistent with UBS policies and FINRA rules," the firm said in the four-page memo, written in a question and answer format. FINRA, the Financial Industry Regulatory Authority (FINRA), is Wall Street's industry-funded watchdog.

By Suzanne Barlyn

Exclusive: UBS tells brokers to keep selling risky Puerto Rico funds

Friday, October 17, 2014

Scotiabank Said to Consider Sale of Puerto Rico Banking Unit

Bank of Nova Scotia, Canada’s third-largest lender by assets, is weighing a sale of its Puerto Rican banking unit that is valued at about $600 million, according to people familiar with the matter.

The Toronto-based lender is in the early stages of exploring strategic options for Scotiabank de Puerto Rico that could include selling it to a private-equity firm or other lender in the region, said the people, who asked not to be identified because the matter is private.

Scotiabank has just begun deliberating its future in Puerto Rico and could still decide to keep the unit, they said. The island’s volatile economy could make finding a buyer for the franchise difficult, the people said.

The lender with C$792 billion ($700 billion) in assets is eyeing an exit from Puerto Rico -- among the smallest and most troubled banking markets in the U.S. -- as it invests in better growth opportunities in Latin America. Scotiabank executives also have concerns about upheaval in Puerto Rico’s banking market should the faltering Doral Financial Corp. be merged into another Puerto Rican lender, the people said.

U.S. regulators have told San Juan-based Doral that it must increase capital to levels decreed by a 2012 consent order or it must prepare to break up or sell, the company said on Oct. 1.

100 Year History

Paula Cufre, a spokeswoman for Scotiabank, declined to comment on the bank’s plans for its Puerto Rican subsidiary.

Scotiabank, which has banked in Puerto Rico for more than 100 years, more than doubled its presence there by acquiring the loans and deposits of the failed R-G Premier Bank of Puerto Rico in 2010.

Scotiabank de Puerto Rico had 35 branches and $5.1 billion in assets as of June 30, according to the Federal Deposit Insurance Corp. The unit earned about $11 million in the first six months of 2014, after posting a loss of about $6.7 million in the year-earlier period, according to the FDIC.

Profit in Scotiabank’s international banking unit fell 16 percent, to C$452 million, in the quarter ending July 31, due in part to “continuing softness” in Puerto Rico, Scotiabank reported in August.

To contact the reporters on this story: Matthew Monks in New York at mmonks1@bloomberg.net; Scott Deveau in Toronto at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Mohammed Hadi at mhadi1@bloomberg.net Elizabeth Wollman


Scotiabank Said to Consider Sale of Puerto Rico Banking Unit