La Fortaleza Details Use of Funds in Metropistas Deal
SAN JUAN — On Friday afternoon, La Fortaleza announced how it will use the $100 million received by the Highways & Transportation Authority (HTA), after extending for 10 additional years the PR-5 and PR-22 concession contract with Metropistas.
The Alejandro García Padilla administration will use roughly $80 million to pay down its outstanding debt with government suppliers, which are owed about $2 billion, officials have said. The Puerto Rico Treasury Department would pay suppliers of essential services, following priority guidelines established late last year to control the disbursement of public funds amid the commonwealth’s cash crunch.
According to La Fortaleza, these funds will address “citizens’ urgent needs,” such as medical services and medicines, food, nursing and abused-children homes, therapists, special education, transportation, cleaning of schools and hospitals, among others.
As for the HTA, it will only receive $18.2 million to pay down what it owes to its suppliers, totaling about $155 million. The remaining $2 million would go to pay for “transaction-related costs,” Friday’s statement further reads.
The announcement comes mere days after municipal bond insurer Ambac sued the HTA in federal court, calling for the establishment of a receiver at the public corporation. The monoline is questioning the “suspect timing” of the recent transaction between HTA and Metropistas, a local subsidiary of Spanish firm Abertis, to the tune of $115 million, of which $100 million was already disbursed to the government.
Although Ambac is not challenging the contract itself through its legal action, it is calling into question the use of said funds, arguing these “would likely be siphoned off by the commonwealth government” for purposes not related to HTA.
La Fortaleza stated Friday the transaction represented “an effective financial alternative amid the commonwealth’s economic situation and the limited liquidity projections.”
As for Ambac’s lawsuit, HTA Executive Director Carmen Villar stated Thursday that the insurer pretends that the commonwealth uses its limited cash to pay bondholders instead of ensuring essential services to Puerto Rico residents.
“It is somewhat a premature action because bondholders have their payments guaranteed until 2017, a fact Ambac admits in their lawsuit,” said Villar. “We cannot yield to untimely attacks of this nature that only intend to intimidate us.”
While the HTA is expected to meet in full roughly $240 million in debt service due July 1—most likely by siphoning its reserve accounts—Ambac believes the public corporation’s ability to make subsequent payments “is very much in question.” By insuring about $470 million of HTA’s $4.5 billion debt, Ambac would have to foot the bill if the authority is unable to do so.
The monoline says the HTA has reached a breaking point that calls for the appointment of a receiver and a deep look into the authority’s “questionable behavior” during the past year, according to the lawsuit. In calling for the establishment of a receiver, the monoline argues that HTA has failed to meet its fiduciary and contractual duties to its creditors.
As previously reported by Caribbean Business, before announcing the use of the $100 million, La Fortaleza dodged a request made by the Government Development Bank (GDB) to have these funds transferred to the cash-strapped bank, before partially defaulting on its May 2 debt payment.
According to the island’s public-private partnership law, which governs the arrangement between HTA and Metropistas, the GDB and the Office of Management & Budget issued a recommendation to the executive branch over the use of proceeds resulting from the transaction.
According to Ambac’s lawsuit, the monoline asked the HTA on April 29 whether the $100 million would be used for the benefit of the authority, to which the counsel for HTA replied that the funds were currently held at the Economic Development Bank in the authority’s name.
Ambac also argues that HTA’s latest actions, while failing to disclose financial information, “underscore the need for immediate relief from this Court in the form of (1) expedited discovery so that Plaintiff can ascertain the full extent of HTA’s malfeasance; and (2) the appointment of a provisional receiver over HTA to avoid further irreparable harm to HTA, its bondholders, and Plaintiff.”