Seeking Alpha

Puerto Rico suggests balanced budget sooner than expected

  • A couple of news items out of Puerto Rico have BTIG's Mark Palmer suggesting a little pressure could come off the stocks of MBIA (MBI), Assured Guaranty (AGO), and Ambac (AMBC).
  • First was last night's announcement Puerto Rico is considering offering $2B in debt in the coming weeks, suggesting the Commonwealth has come to terms with paying as much as a 10% interest rate - unsustainable in the long-term, of course, but Palmer says to consider the $2B "bridge financing" which takes default off the table for two years.
  • This morning, Governor Alejandro Padilla announced he will introduce a balanced budget for the 2014-15 fiscal year in the coming weeks, ahead of a previous goal of 2016. The accelerated schedule, says Palmer, could address the concerns of ratings agencies itchy to downgrade Puerto Rico to junk, and it might allow something lower than a 10% coupon on the possible debt offering.
Comments (2)
  • DeepValueLover
    , contributor
    Comments (7772) | Send Message
     
    I figure if California didn't blow up then Puerto Rico won't blow up either.
    3 Feb, 02:28 PM Reply Like
  • dsr70
    , contributor
    Comments (1250) | Send Message
     
    Seems this hinges on not having another major national fiscal and/or banking crises. I suppose that's obvious and goes for many locales and companies. But PR is closer to toppling than others, so even a hiccup in the market would send them scrambling.
    4 Feb, 08:18 AM Reply Like
DJIA (DIA) S&P 500 (SPY)