NEWS THAT’S RELEVANT TO OUR INVESTORS
Belle Haven in the News.
Puerto Rico to Make Debt Restructuring Proposal in a Few Weeks
Puerto Rico to Make Debt Restructuring Proposal in a Few Weeks
By Michelle Kaske
September 9, 2015, 9:00 AM EDT Updated on September 9, 2015, 2:06 PM EDT
Puerto Rico plans to present a debt-restructuring offer in a few weeks to address a projected $13 billion shortfall in bond payments due over the next five years that the commonwealth says it can no longer afford to pay.
“We’ll be ready with a first proposal as to how to make the $18 billion worth of contractual debt service fit to the available resources we have under this plan,” Jim Millstein, the island’s chief restructuring adviser, said in San Juan, after Governor Alejandro Garcia Padilla’s administration released what they’re calling a fiscal and economic growth plan. Puerto Rico said it only has $5 billion available for the payments.
Prices of some of the commonwealth’s bonds, which have been trading at distressed levels, fell after Puerto Rico made it clear in the proposal that it would seek to force losses on most debt investors. It also pursue a moratorium on principal payments for several years, according to Melba Acosta, the island’s main debt official.
The proposal paints a dire picture of Puerto Rico’s finances and the consequences to the island’s 3.5 million residents. The projected shortfall is after anticipated savings from the consolidation of 135 public schools, reductions in health-care spending, additional subsidy cuts and reductions in payroll expenses. The estimate excludes the island’s electric and water utilities.
“We’re a long way from knowing what the end result is going to be on some of these credits,” Matt Dalton, chief executive officer of Rye Brook, New York-based Belle Haven Investments, said prior to officials submitting the plan to the governor on Tuesday. The firm manages more than $3 billion of municipal securities, including Puerto Rico debt.
Puerto Rico is facing a more immediate liquidity crunch. Officials estimate the island will have a $500 million shortfall by the end of June. The commonwealth owes $805 million on July 1 to general-obligation bondholders, according to data compiled by Bloomberg. Officials anticipate a total revenue shortfall of $28 billion in the next five years that may be reduced by about half by cutting expenditures and boosting revenue collections.
The plan indicated that the commonwealth may have trouble paying off its general obligation bonds and has authorized its advisers to begin working on a voluntary exchange offer. “Available resources may be insufficient to service all principal and interest on debt that has a constitutional priority,” the report said.
That may pit holders of general-obligation debt, which Puerto Rico’s constitution says must be paid first before other expenses, against investors of sales-tax bonds, which have a dedicated revenue stream.
“These claims actually compete with each other,” Millstein said. “Reconciling the competing claims of the creditors is going to be one of the difficult tasks here.”
General-obligation bonds with an 8 percent coupon and maturing July 2035 traded at an average price of 73.2 cents on the dollar, down from 75.5 cents on Tuesday. That’s up from a record-low 66.6 cents on June 30, after Garcia Padilla said the island would seek to delay payments, according to data compiled by Bloomberg. The average yield was about 11.5 percent.
Moody’s Investors Service said it may downgrade the commonwealth below its current rating of Caa3 depending on the outcome of bondholder negotiations.
The governor will select a five-member control board from nominees submitted by creditors, outside stakeholders and possibly the federal government, officials said prior to the release of the plan to the public. That panel will have the power to enforce budgetary cuts. Some analysts have called for federal control of any oversight panel.
Puerto Rico and its agencies have racked up what they say is an unsustainable debt load after borrowing to fill budget shortfalls and push out payments. Various administrations turned to deficit borrowing with the expectation that an improving economy would end the practice. Instead, the island’s economy has shrunk every year but one since 2006 and is projected to decline another 1.2 percent in the fiscal year ending June 30, 2016.
Cincinnati/Northern Kentucky Airport needs to readjust through Delta service reductions – Red
By Maria Amante
An audit blasting the Cincinnati/Northern Kentucky Airport’s management, the Kenton County Airport
Board, has led one state legislator to push for an overhaul of the board’s structure.
Kentucky’s Auditor of Public Accounts, Adam H Edelen, called for an overhaul of the airport’s board after
declaring the airport has suffered from “decades of waste and abuse”. Kentucky State Rep. Diane St
Onge, a Republican, authored legislation (HB 208) and had seven co-sponsors that adds additional
members to the board and changes how the board members are appointed. The bill was introduced in
February and approved by both chambers in March.
“It adds increasing oversight with more members and everything has to be run through fiscal court:
there’s not just one person in charge of appointing members through the board. That’s the biggest
difference between the last board composition and this one,” St. Onge said in an interview with Debtwire
Currently, the Kenton County judge-executive appoints all of the board’s seven voting members.
Cincinnati has worked to find a new normal as Delta makes service reductions, including a 14% reduction
in service in March, according to previous reports. In 2013, American, US Airways, United and Frontier
shared the remaining 25% of enplanements.
That year, which is the most recent available, the airport had 141 average flights per weekday, with 2.87
million total enplanements. About 75% of those passengers were origin and destination passengers, and
75% of those flights were Delta flights. In 2010, the airport operated 197 daily flights with 3.98 million
enplanements, according to the 2010 audited financials.
Cincinnati is among the most expensive airports nationwide, but serves a bustling economic area, said
Mike Boyd, president of Boyd Group International, an aviation consulting firm.
“They don’t have a choice, one way or another--Delta calls the shots. Delta’s pulling numbers down,
there’s no question about it, it will be the same thing that happened to Memphis and San Jose, Raleigh –
nothing new,” Boyd said.
“But the Cincinnati/Northern Kentucky Airport is in a powerful economic region. It can be supported
without a hub – overall, they have good access to and from the rest of the world. It will never be a lowcost fare (airport) but you can get to any spot in the world from there, with worst case, one connection,”
Airports are more resilient than they’re given credit for, said Tamara Lowin, director of research at Belle
Haven Investments. Airports generally have a closer connection to corporate economic cycles, which is
why they are one of the first sectors to weaken, but also among the first to rebound.
“Fewer revenues come directly from airlines than one would initially think. Their main revenue sources
include parking, car rentals, and concessions, as well as airlines. Airlines generate gate fees and landing
fees. If fewer flights are going through the airport, then the other revenue streams decline as well, but
they aren’t as airline-specific,” Lowin said.
The airport collected USD 98.5m in revenue in FY13, the most recent information available, which was a
drop of USD 5m from FY12. Its primary revenue sources include landing fees and concessions. In FY13,
it posted USD 69.91m in operating expenses and USD 30.35m in non-operating expenses, for a deficit of
USD 1.7m. The facility ended FY13 with a net position of USD 920.73m. It had USD 87.7m in cash, which
is a USD 15.4m increase of FY12 levels.
The facility has USD 85.65m in revenue bonds outstanding with maturities of 1 March through 2033 and
will pay USD 122.93m in total debt service, as of 2013. In FY14, the facility was scheduled to pay USD
29.2m in debt service.
Debt per enplanement is low and estimated between USD 22.00 and USD 26.00 per origin and
destination passenger, according to Standard & Poor’s estimates.
The facility contributes to a retirement plan and postretirement benefit plan, the Kentucky Retirement
Systems County Employees Retirement System (CERS) and Kentucky Retirement Systems Insurance
Fund. CERS has a funded ratio of 60.1%, and the insurance fund has a funded ratio of 66.62%.
A bill to superfund the Kentucky Teachers Retirement System with USD 3.3bn in pension obligation
bonds fizzled in the Kentucky legislature last month, according to Pensions and Investments.
Read original article: https://www.bellehaven.com/sites/default/files/news/DEBTWIRE.pdf