The Puerto Rico Aqueduct and Sewer Authority (PRASA) owes 140 million to contractors for completed capital projects; 140 million they do not have. Instead of defaulting on their public bonds which have gross revenue pledges they will likely on their private loans made by other Puerto Rican Agencies like PRIFA and the GDB (which are all arms of the Commonwealth). 

The Puerto Rican Legislature is voting on a bill this week to allow PRASA to create a new (and apparently more secure) entity. The new corporate entity will have a priority claim on a percentage of the water revenues. These revenues will flow directly to this new entity for the sole purpose of paying debt service. The concept is that this "new entity" will be considered a "secure" entity, obtain investment grade ratings, and be able to issue new bonds at attractive yields. 

In 2006, the PR Legislature used the same logic to create Cofina; a new company with priority claim on sales taxes. In this case they received a AA rating and investors lent them over 16 billion dollars under the belief that the sales taxes would secure/support the debt service. Fast forward to 2016 and the Governor and his administration are now suggesting that they were just kidding and that the Cofina entity may not have first claim on these sales taxes.

Hello....does the Puerto Rican Administration/Legislature really think investors are that stupid?