(Updates to include statement from MSRB; updates dateline)
SAN JUAN, Puerto Rico, Oct 1 (Reuters) - Puerto Rico’s upcoming sale of $900 million of tax revenue anticipation notes (TRANS) will be placed privately with a syndicate of banks, the chairman of Puerto Rico’s Senate Finance Committee said.
“It’s a pretty routine transaction. The problem is that we usually pay 1 percent to 2 percent in financing and this time it will cost from 5 percent to 8 percent,” Jose Nadal Power told Reuters on Tuesday.
Power expected legislation to be passed next Monday that would enable Puerto Rico to move forward with the deal. The legislation opens the way to allowing investors to sue under New York law in the event of any litigation related to the notes.
Limited bond information published late on Tuesday on website Electronic Municipal Market Access, run by a market self-regulator, appeared to indicate that a bond issue is upcoming from the U.S. commonwealth’s Government Development Bank (GDB).
The information published on EMMA contained bond identification numbers known as CUSIPS. It did not include an official statement or indicate the amount of the offering, but did show a maturity date on June 2015 and an interest rate of 7.75 percent.
The publication of the information was unusual as CUSIPS are not normally published before a sale has taken place.
A spokesperson for the Municipal Securities Rulemaking Board (MSRB), which maintains the EMMA website, said the move was not unusual as underwriters in negotiated transactions are required to apply for a CUSIP “by no later than the time that pricing information for the issue is finalized.”
A spokesman for Puerto Rico’s Government Development Bank (GDB) declined to comment.
The legislative move is seen as providing additional protection for investors, who may be wary of lending to Puerto Rico after it was hit by a number of credit downgrades, and attempted to restructure some of its public corporation debt.
Puerto Rico also allowed a New York legal jurisdiction for the $3.5 billion general obligation deal it undertook in March.
The senator did not know which bank headed the syndicate, but it had already been formed and the deal could move forward as soon as legislation was enacted early next week.
The House passed an amended version of the bill earlier this month giving additional powers to the Treasury secretary only for the upcoming TRANS sale, a move that Power said the Senate would concur with.
“I don’t see any problems with the bill’s passage. Senators are in agreement with the changes made by the House,” Power added. (Reporting by Reuters newsroom in San Juan.; Additional reporting and writing by Edward Krudy; Editing by Meredith Mazzilli, Andre Grenon, Bernard Orr)