GDB hits back at report on PR bonds

The report by Janney Capital cites local fiscal woes and headwinds in the Puerto Rico, U.S. and global economy as factors that make investing in commonwealth bonds riskier.

“Although we anticipate no default of Puerto Rico bonds in the near term, the recovery resistant econ­omy, extremely high debt load, very low pension funding levels and persistent government deficits are of significant concern,” the report said. “Recent reform measures have generated improvements, but the likelihood of continuation is questionable, and the U.S. and global economic slowdown will have further negative ef­fects on Puerto Rico’s economy and revenues. At this time we see no reasonable argument supporting significant near term improvement of the economy.”

Janney sounded the alarm about Puerto Rico’s roughly $30 billion in outstanding tax-backed debt, a tab that doubles when major revenue debt is considered. The firm also points to Puerto Rico’s pressing unfunded public pension problem.

Janney Capital also faulted the island government for a lack of financial transparency and unreliable statistics.

GDB Executive Vice President José Otero sought to counter those concerns on Tuesday.

“We disagree with Janney’s take on Puerto Rico’s bonds and the transparency of information provided,” Otero said. “The current administration has been focused on establishing open and clear communication with bondholders, ratings agencies and the press about Puerto Rico’s financial situation.”

The official noted the GDB Economic Activity Index has remained in positive territory for five straight months, its best performace since the onset of the island recession in 2006.

“We have been able to stop the steep fall that started in 2006 to enter a phase of stabilization and growth,” Otero said. “We know we still have a lot of ground to recover, but the numbers show we are headed in the right direction.”