WASHINGTON (Reuters) — The White House is
not considering a financial bailout for Puerto Rico, where chronic
fiscal challenges have raised the specter of a Detroit-like bankruptcy,
an Obama administration official said on Wednesday.
The island's woes have led credit rating agencies to say they are
considering labeling the U.S. territory's general obligation debt as
junk bonds.
Puerto Rico already pays the highest interest rates of any big
municipal bond issuer.
"The President's Task Force continues to partner with the
Commonwealth to strengthen Puerto Rico's economic outlook and to
ensure that it is taking advantage of all existing federal resources
available to the Commonwealth," White House spokeswoman Katherine
Vargas told Reuters in an email.
"There is no deep federal assistance being contemplated at this
time," she said.
Puerto Rico has raised taxes, reformed pension systems and cut staff
in moves meant to counter chronic budget deficits and an economy in
or near recession for eight years.
Puerto Rican fiscal reforms are aimed at keeping its
investment-grade credit rating, which stands just a notch above
junk-bond status by all three Wall Street credit rating agencies.
An administration official said Puerto Rice had made progress in
addressing its fiscal situation and that any additional federal
actions or direct assistance would require congressional
authorization.
The territory has demonstrated the will to tackle some of its
challenges, the official said.
The island's bond prices took a hit last week when the Puerto Rico
Supreme Court stopped reforms to a teacher pension system that were
aimed at bolstering the commonwealth's finances.
News reports have said owners of some of the island's $70 billion of
bonds were meeting to discuss Puerto Rico's wobbly finances. A group
of investors led by Morgan Stanley is exploring providing about $2
billion in financing to the island to strengthen its finances, the
New York Times reported on Tuesday.
The government is planning a return to the municipal bond market by
the end of February, as part of efforts to retain its
investment-grade rating. Officials say the exact timing and size of
the deal are still pending. They have said in the past they would
try to raise between $500 million and $1.2 billion through bonds
backed by the sales and use tax and sold through the Sales Tax
Financing Corporation, known as Cofina.
Both Moody's Investors Service and Fitch Ratings, which have warned
of a potential downgrade of Puerto Rico general obligation and
related credit to junk, have cited market access, as well as budget
and economic performance as critical factors in retaining an
investment-grade rating.
(Reporting by Mark Felsenthal; editing by Sandra Maler and Peter
Cooney)
