Acosta Talks About Her Exit from the GDB
SAN JUAN — Melba Acosta had mulled it over for quite some time before picking the best time to leave her post as chief financial officer of the Puerto Rico government and return to the private sector.
“It is never the best time,” she told reporters at the offices of the Government Development Bank, the institution she will leave July 31. During a late meeting Wednesday, July 6, Acosta informed Gov. Alejandro García Padilla about her decision to resign.
While acknowledging there is a long way ahead for the island’s fiscal recovery and that her intention was to finish the restructuring of Puerto Rico’s public debt, she is “happy that we did everything we could do within our realities.”
Acosta denied her resignation was tied to inquiries by the Securities & Exchange Commission (SEC) over the island’s fiscal matters. According to the GDB’s most recent audited financial statements, the federal agency has been requesting information since December 2014 on two debt issuances by the García Padilla administration.
“My departure has absolutely nothing to do with this as some people have said, and if that would have been the case, I would have left in December 2014 and not now,” she said.
The official conceded that she is not “necessarily involved in the day-to-day of this matter,” as government lawyers are the ones who speak with the federal agency and provide the requested information.
She added that “these things happen,” while recalling how the SEC has previously investigated issues related to Puerto Rico bonds without taking further action.
“All the information we are asked for, we cooperate and give it to them,” she stressed. “[The SEC] will conduct the investigations they have to do.”
With the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa) and its tools to broadly restructure the island’s debt, the approval of a budget for the new fiscal year and the recent publication of the commonwealth’s audited financial statements, Acosta understood it was the right time for her departure.
During the next few days, she will meet with García Padilla to discuss the current state of affairs at the GDB, which has been operating under cash-outflow restrictions since April as a result of the locally enacted moratorium law.
The GDB faces serious liquidity problems and has an outstanding debt of some $3.5 billion. Last May, the bank failed to meet $367 million in debt-service payments.
Acosta believes La Fortaleza should decide whether to continue debt-restructuring negotiations with its creditors soon, or instead wait until the federally appointed financial control board begins operations.
She understands this is something that needs to be discussed with creditor groups, while noting how the many competing interests among them, along with the uncertainty surrounding the government after recent events, have halted negotiations.
The official said some groups seek to reach an agreement before the board takes office, because of how long this could take to happen, which would further affect bond prices. Others prefer to wait for the board or the new government administration.
“Hopefully, they will continue,” she said in reference to creditor talks. “If we can continue and we can achieve something, I think it is positive. We were not so far away … .I think it is worth trying.”
With Promesa, Acosta said the collective-action mechanism and the stay against creditors’ litigation are key elements that could significantly help in reaching debt-restructuring deals with creditor groups. These agreements would have to be approved by the board before implementation, as provided by federal law.
Amid a dire financial situation and questions over the future of the GDB as a public entity—which still linger, as acknowledged by Acosta—she argued how the moratorium legislation provided alternatives to the bank’s liquidation or receivership process, which was the only option available before the enactment of the local moratorium law.
“The GDB certainly has a future—if you believe in it. Unfortunately, some people do not necessarily believe in it. But the GDB could have a future,” said the lawyer and accountant.
Acosta highlighted municipal financing as one of the most important roles that the institution could have moving forward. “Municipalities have the CAE, which is the [municipal] property tax charge through CRIM [Municipal Revenue Collections Center]. That is a very good refinancing source. It is a good credit,” she said, adding that private banks are not facilitating this funding to municipalities.
However, several legislators and mayors have publicly expressed their reservations regarding keeping the GDB, and recommended moving toward other directions.
“More than a choice of a successor, it is a public policy decision of the government. What will the role of the bank be? I think it goes beyond the person who comes after me. There must be a vision,” Acosta said.