February 3, 2014 / 3:07 PM / 4 years ago

UPDATE 2-Puerto Rico to roll out balanced budget a year early -official

NEW YORK, Feb 3 (Reuters) - Puerto Rico's governor, battling
to keep the Caribbean island's bonds from being labeled junk by
Wall Street ratings agencies, will roll out a balanced budget
plan for fiscal 2015, a year ahead of schedule, a top aide said
on Monday.
   Gov. Alejandro Garcia Padilla will present a balanced budget
in coming weeks, according to Ingrid Vila Biaggi, the governor's
chief of staff. The governor had earlier pledged a balanced
budget for fiscal 2016.
    Since taking office a year ago, the Garcia Padilla
administration has raised taxes, overhauled retirement programs
and pledged to end years of operating deficits aggravated by
Puerto Rico's shrinking economy and population.
    A big issuer of municipal bonds, with about $70 billion of
debt outstanding, Puerto Rico is rated barely investment grade
by the top three U.S. credit agencies. All have said they may
cut the island's credit ratings, which would raise borrowing
costs and hurt demand for the island's outstanding bonds.
    Puerto Rico officials said in a news release that pension
changes, tax hikes and other reforms helped make a balanced
budget possible. They also said a projected deficit for fiscal
2014 ending June 30 would be reduced by $170 million to $650
    "To balance the budget, we will not need to utilize
contingent reserves and additional expenses that were factored
into the current budget" said Carlos Rivas, director of the
Puerto Rico Office of Management and Budget.
    Some agency operating budgets had been changed with an eye
to cutting costs, Rivas said, adding the shifts and savings did
not require job cuts on an island with a 15.4 percent
unemployment rate.
    "I do think it would be positive for investors and rating
agencies," Janney Capital Markets analysts Alan Schankel
said. "I suspect it would have to involve some expense
    Prices of some Puerto Rico bonds rose on Monday, adding to
bounce back gains in January from a sustained selloff that began
in September. A 2042 revenue bond with a 6 percent coupon from
the island's sales-tax authority rose to 77.75 cents on the
dollar after closing on Friday at 75.6 cents; its spread over a
comparable U.S. Treasury narrowed to 416 basis points from 440,
according to Municipal Market Data.
   Separately, Puerto Rico Treasury Secretary Melba Acosta Febo
said final general fund net revenues of the General Fund for
December totaled $925 million, or $12 million higher than the
preliminary figure announced in early January. The December
revenues were up $203 million, or 28 percent, over December
2012, she said in a news release.

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