Puerto Rico Electric Power is selling $ 500 million in liabilities Build America Bonds

Puerto Rico Electric Power Authority, the largest U.S. utility public authority by revenue, is selling $ 500 million in liabilities Build America Bonds before the end of the program to save $ 130,800,000 in tax-free loans, said Finance Director Martin V. Arroyo Feliciano.

The agency rushed to the government-subsidized debt before the December 31 deadline for the capture of the program 35 percent savings in interest costs and avoid the traditional borrowing tax-exempt.

U.S. issuers brought forward sales expected this month to capture the subsidy, so that the last three months of 2010, the fourth largest sales, as America began building in April 2009. Government Development Bank for Puerto Rico decided the offer earlier this month as it became less likely that the program be extended, said Arroyo.

"We started running around getting information, I had to leave my treasurer to go on vacation," he said in a telephone interview from San Juan. "But we did."

The current problem, backed by the cost of electricity, can produce 6.25 percent for bonds to 30, said. That's a premium of around 180 basis points, or 1.80 percentage points over U.S. Treasuries. With the subsidy, the cost of the general interests of the authority may be less than 5 percent, he said.

Energy yields

In comparison, the debt to 30 years tax exemption backed by revenues from energy rated A, sixth highest investment grade, yielded 5.91 percent yesterday, according to index of the fair market value. The authority is rated BBB + by Standard & Poor's and Fitch Ratings, the degree of third-lowest investment. Moody's Investors Service ranks A3 useful, level.

Build America rates compared with 5.72 percent yield on the obligations of long-term utility companies rated BBB to A, according to the rate of Bank of America Merrill Lynch.

While the number of units to increase the income of the authority, the income stream is safe, "said Bud Byrnes, executive director of Encino, California, RH Investment Corp.

"They trade more cheaply than any credit out there and we will not go bankrupt," Byrnes said in a telephone interview. "Consequently, there will be a market."

The bonds of Puerto Rico, a self-governing commonwealth ceded to the U.S. in 1898 after the Spanish-American War, offer investors an exemption from any state tax, unlike most municipal debt.

'Deal of the Week

The authority had $ 10.1 billion in revenue bonds outstanding before the sale, making it second only to the State Department of Water Resources.

"This is the deal of the week," said Tony Shields, a director in public finance department at Williams Capital Group LP in New York. "It will be a tremendous interest."

The authority, a monopoly that provides electricity to 1.4 million consumers, is the largest power utility by the number of customers and revenue, according to preliminary offer documents.

Funds will be used for Puerto Rico Via Verde project, a pipeline that will transport natural gas to several power plants, the documents show. The money can also be used to finance the authority's plan for capital improvements.

The project, which will be completed in February 2012 according to bond documents, is part of a government to encourage the development of alternative energy to lower fuel costs on the island. The use of natural gas will save customers $ 1,000,000,000 dollars, "said Arroyo.

The ultimate authority Americas building sold in April, with 30 - year securities to yield about 6.13 percent, about 149 basis points over benchmark Treasuries. Securities traded on December 20 with an average yield of 6.43 percent, or 199 basis points above U.S. government debt.

The following is a description of a pending sale of U.S. debt City:

Metropolitan Water Reclamation District of Greater Chicago, a wastewater utility serving more than 5 million people, plans to sell $ 500 million of debt and tax-exempt liabilities as early as 3 January. The values are top-ranked of the three major credit rating companies. JPMorgan Chase & Co. The marketing of equity underwriters.