Puerto Rico Finds $5 Billion More Cash in Latest Disclosure

(Bloomberg) -- Puerto Rico said it had $5 billion more in cash than disclosed three weeks ago after scouring more than 800 government bank accounts, underscoring the murky financial reporting that’s complicated the bankrupt island’s effort to emerge from a crippling debt crisis.

The territory on Monday said it had $6.9 billion at the end of November, according to a securities filing that includes several accounts that were left out of the previous disclosure. That new tally, which is up from $1.73 billion reported on Dec. 1, comes just days after a judge ordered the government to turn over more financial data to bondholders who have long complained about a lack of reliable information.

That has proven an obstacle to Puerto Rico’s negotiations with creditors and complicated the effort by federal officials to help craft a turnaround plan that will determine how much of the government’s $74 billion debt can be repaid. The crisis has been rendered even worse by the devastation brought by Hurricane Maria in September.

“This 11th hour release of financial data, which follows more than a year of the commonwealth and the oversight board stonewalling creditors on even the most basic issues of transparency, raises far more questions than it answers," said Andrew Rosenberg, an attorney with Paul Weiss Rifkind Wharton & Garrison who is representing a group of bondholders. "The commonwealth has not leveled with the public, the court, or its creditors about the state of Puerto Rico’s finances.”

The federal oversight board said in a statement Monday that it would start a forensic investigation of the government’s accounts and plans to hold a hearing in January on how the funds may be used. The governor’s representative on the panel, Christian Sobrino, said the latest disclosure is more comprehensive than prior reports and shows the previously undisclosed cash of several public entities beyond the central government.

"This shows the whole snapshot of the government accounts," he said in a telephone interview. "When we published the disclosure of this document, we said the next step in our review process is an independent review of the bank accounts and we would want the involvement of the oversight board and creditor groups."

The price of the government’s securities were little changed after the disclosure. The island’s benchmark general-obligation bonds due in 2035 traded at an average price of 22 cents on the dollar Monday in light trading.

A fund for immediate cash needs of Puerto Rico’s central government had $1.5 billion as of Dec. 14, down from $1.643 million on November 30, the filing showed. Puerto Rico’s electric utility had $545 million and the sewer utility had $327 million as of Dec. 8, compared with about $600 million and $340 million, respectively, at the end of last month.

The head of the government’s fiscal agency, Gerardo Portela, said this month that the island’s electric and sewer utility would run out of cash in December and needed federal loans to keep operating. In an interview Monday, Sobrino said that the disclosure did not change the agencies’ need for cash and includes funds to which the government does not have full access.

"The balances that we’re showing in the report include restricted accounts," he said. "In terms of the operations, they are in dire need of cash."

Despite officials’ claims that some of the island’s agencies were running low on funds, the governor’s administration said it would pay about $113 million in legally-mandated Christmas bonuses to its public employees, including first responders who worked on recovery efforts in the aftermath of the storm.

In an interview last month in San Juan, oversight board member David Skeel said that one of the most difficult components of coming up with the first fiscal plan was finding reliable baseline numbers.

David Tawil, president and co-founder of Maglan Capital, a former Puerto Rico bondholder, said Monday’s disclosure will be welcome news to some creditors because it reveals there are more resources, though it may also raise other questions about the proceedings.

"People are trying to figure out what this number means," he said. "Even with all the mismanagement that has been alleged, even with all the cloud over the books and records, even with the allegations that the government has obfuscated their accounts -- it’s still a huge number."

"If this was a corporation and they reported this number, heads would roll," he said. "It leaves me speechless. It just leaves me wondering what else we don’t know."

To contact the reporters on this story: Rebecca Spalding in New York at rspalding@bloomberg.net, Steven Church in Wilmington, Delaware at schurch3@bloomberg.net.

To contact the editors responsible for this story: James Crombie at jcrombie8@bloomberg.net, William Selway

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