Puerto Rico’s Government Development Bank hired FTI Consulting Inc. (FCN:US) to help the island’s public corporations operate self-sufficiently.
FTI Consulting, based in West Palm Beach, Florida, specializes in corporate restructurings. The island’s utility providers and government agencies have tapped the Government Development Bank, the island’s financing arm, for loans and relied on allocations from Puerto Rico’s operating budget, practices that Governor Alejandro Garcia Padilla has said should end.
“The GDB frequently engages leading advisers to support its due diligence and decision making processes,” the bank said today in an e-mailed statement. “To that end, the GDB has engaged FTI Consulting to advise on its ongoing and previously disclosed efforts to ensure that the island’s public corporations become self-sufficient.”
New York-based Cleary Gottlieb Steen & Hamilton LLP, which worked on Greece’s 2012 sovereign debt restructuring and represents Argentina in debt matters, was also hired, the GDB said April 7. Millstein & Co., based in New York, was hired prior to the commonwealth’s $3.5 billion general-obligation sale that priced March 11 to help evaluate financing proposals and to analyze the territory’s capital structure.
The three largest credit rating companies cut Puerto Rico’s debt to junk in February. The commonwealth and its agencies owe $73 billion, according to bond documents. The island’s economy has shrunk in five of the past seven fiscal years and is set to decline by 0.8 percent in the fiscal year ending June 30, casting doubt on the commonwealth’s ability to repay investors.
Puerto Rico’s $3.5 billion bond sale balanced budgets and gave the commonwealth sufficient cash through June 2015. The bond, maturing July 2035 and originally priced at 93 cents on the dollar, traded today at 89.75 cents, its lowest price ever, data compiled by Bloomberg show. It traded as high as 99 cents March 12.
Hedge funds were the biggest buyers of the debt when it first sold in March, purchasing about 70 percent of the sale, the Wall Street Journal reported yesterday on its website, citing confidential documents it reviewed. Brigade Capital Management LLC, Fir Tree Partners, Paulson & Co. Inc. and Perry Capital LLC each bought $120 million, while Och-Ziff Capital Management Group (OZM:US) purchased $110 million, according to the newspaper, which also first reported the FTI appointment.
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