Puerto Rico bank misses 2011 bond payment, agrees to private exchange

By Caroline Salls

Pittsburgh, May 3 – The Government Development Bank for Puerto Rico (GDB) failed to make a $367.07 million principal payment due March 1on its series B 2011 senior notes as a result of an executive order signed April 30 by the governor of Puerto Rico that placed a moratorium on payments of all GDB covered obligations, including the notes.

According to a notice released Tuesday, the executive order declared all of GDB’s letters of credit and deposit liabilities to be enumerated obligations and declared a moratorium on the payment of covered obligations other than deposit liabilities and interest obligations that are not required to be paid in cash.

In addition, the order authorized GDB to pay any interest obligation that would have been due during a specified emergency period, as long as its liquidity allows the payment and to the extent authorized by the governor after receiving a request from GDB’s board of directors.

GDB said the moratorium constitutes an event of default under the notes indenture, but the moratorium prohibits enforcement of any default-related rights.

As previously reported, the governor signed the Puerto Rico Emergency Moratorium and Rehabilitation Act on April 6, and signed an executive order on April 8 declaring GDB to be in a state of emergency and beginning an emergency period for the bank, establishing restrictions on the withdrawal of deposits and implementing other measures that were necessary for GDB’s continued operations.

In a separate release, GDB said it reached an agreement with various state-chartered credit unions in Puerto Rico to implement a limited private exchange of roughly $33 million of notes due on May 1 for newly issued GDB notes maturing May 1, 2017.

GDB said the exchange was structured to be completed in advance of the May 1 principal payment date and settled on April 29.

Apart from this private exchange, GDB said it continues to negotiate a potential transaction related to all of its bond debt.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.