February 25, 2021

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Puerto Rico returns to the markets after AAFAF finalizes AFV bond refinancing


photo: Cybernews

San Juan – The executive director of the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF) Omar Marrero Díaz announced on Tuesday that Puerto Rico managed to access the capital markets after the Housing Financing Authority (AFV) and Public Housing Administration (AVP), will refinance the current bonds of the AFV, generating savings that reached about 43 million dollars in debt service.

“This transaction achieves, on average, savings in debt service of over 8.5 million dollars per year, whose funds could be used to benefit the Public Housing Modernization Program. The bonds in this issuance have maturities similar to those of the Outstanding Bonds from 2020 to 2028. This transaction represents an important step in Puerto Rico’s return to the capital markets and demonstrates once again that we are restoring confidence in Puerto Rico, ”said Marrero Díaz, who also serves as the main financial officer of the Government of Puerto Rico in written communication.

Marrero Díaz explained that the refinancing of the Outstanding Bonds was carried out through the issuance of 249.6 million dollars in refinancing bonds of the Capital Modernization Funds Program (“Refinancing Bonds”).

The refinancing also resulted in the reduction of the total debt that existed prior to the transaction of $ 300.5 million by managing to use funds in the accounts of said issues and in the sale of new bonds at premiums that generated additional funds.

The transaction received a substantial demand from traditional investors, with over $ 750 million in interest indications, resulting in a demand that was more than three times the amount of bonds available.

The total cost of interest, including expenses associated with structuring and selling the new issue, turned out to be 1.27 percent.

Currently, the AFV has approximately $ 300 million in outstanding bonds issued under the Capital Funds Program of the federal Department of Housing and Urban Development (HUD), with maturities between 2020 and 2027.

The AFV issued its bonds in 2003 and 2008 and loaned the proceeds of these issues to the AVP to make improvements and modernize public residential projects throughout the Island in accordance with the purposes of the federal program.

The principal and interest on the refinanced bonds and the new bonds are payable only from federal appropriations made by the United States Congress each year for public residential modernization and improvement projects through HUD.

The bonds do not constitute a debt, obligation or promise of payment of the Government of Puerto Rico, its agencies, instrumentalities or public corporations.

The AVP is responsible for the development and operation of the public housing units and receives grants and subsidies from HUD.

Its public policy is aimed at achieving a highly efficient administration with the north of improving the quality of life in public housing units, promoting community activity and the integral development of Puerto Ricans who live in said housing projects.

It is important to note that, although the source of repayment of the bonds consists of HUD grants and subsidies, the reduction in debt service that would result from the proposed refinancing would result in more funds available to carry out AVP’s mission.

For its part, the AFV fulfills the purpose of providing financing and services to create and preserve affordable housing, and thus contribute to the socioeconomic development of Puerto Rico, providing financing options for low or moderate income families.



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