Last week the Commonwealth proposed a 2.2 billion Puerto Rico Infrastructure Finance Authority (PRIFA) deal backed by fuel taxes. The proceeds of this deal would be used to repay Puerto Rico Highway and Transportation (PRHTA) loans to guess who...the GDB. As a reminder, the GDB is the main source for Commonwealth liquidity. In essence, this would monetize newly passed revenues supporting PRHTA debt; essentially giving the GDB a priority claim. 

Along with the new PRIFA announcement, this Administration has now passed the Fiscal Sustainability Act and the Recovery Act. All clear signs that they will do everything they can to protect the Commonwealth budget.

The media will continue to discuss the legal challenges to the Recovery Act and the fact that States cant make bankruptcy law. PR will argue that the Recovery Act is not a Bankruptcy Law and is a way for them ( a sovereign) to ensure the continued supply of vital public services during a financial crisis. Some legal experts believe the cases will end up in State Court.

The rating agencies and some creditors will paint a negative picture of the administration and color them as "being less likely to pay". We disagree and applaud their decision to stop funding these labor protected and massively inefficient organizations. A crisis may be the only way to make the changes needed to right these organizations and help PR reduce the economic burden of high utility costs.

They ain't kidding, the Commonwealth budget will be protected and therefore the GO and COFINA credits look stronger, not weaker.