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UPDATE 2-Chief of Puerto Rico Gov't Development Bank to resign
July 17, 2013 / 2:51 PM / 4 years ago

UPDATE 2-Chief of Puerto Rico Gov't Development Bank to resign

* President to depart after 7 months in job

* Exit by key island policymaker comes ahead of bond deals

* Moody’s sees no effect on near-junk bond rating

SAN JUAN, July 17 (Reuters) - The president of Puerto Rico’s Government Development Bank, Javier Ferrer, will resign this week after seven months on the job because his mission to fix the agency is complete, the governor’s office said.

The GDB sells bonds for Puerto Rico, its agencies and local governments, and also lends to them.

Ferrer, who will leave on July 19, will continue as a financial affairs adviser to the governor, whose administration is being closely watched by U.S. municipal bond investors, who already require Puerto Rico to pay the highest interest rates of any big municipal borrower on its $70 billion of debt.

“Javier Ferrer came to resolve the critical fiscal situation at the bank and in public finances. He completed his mission,” Governor Alejandro Garcia Padilla said in a statement late on Tuesday.

Ferrer has been a key figure in financial reforms, including an overhaul of Puerto Rico’s main government pension, the implementation of nearly $1.4 billion in new taxes to fund the fiscal 2014 budget, and tax increases to bolster the finances of key public corporations.

His resignation, which local media said was expected after a fiscal 2014 budget was approved on June 30, comes amid reports of policy differences over changes in sales taxes among Ferrer, lawmakers and other administration officials.

Ferrer’s departure was announced to credit rating agencies last week, according to local news reports, but was not expected to signal a change in administration fiscal policy ahead of big planned bond sales.

A spokesman for Moody’s Investors Service in New York said Ferrer’s exit should not affect any of its credit ratings. The three U.S. major rating agencies grade Puerto Rico just above junk at Baa3/BBB minus.

After a year’s absence from the primary bond market, Puerto Rico and the GDB plan to refinance up to $3.3 billion in bonds.

GDB Executive Vice President José Pagán will become interim president, the governor said. David Chafey, who was appointed by Garcia Padilla along with Ferrer, remains board chair at the GDB.

Treasury Secretary Melba Acosta, who is the administration’s chief public finance officer and top official in fiscal matters, and Chafey formed the core, along with Ferrer, of the administration’s financial team that has dealt with municipal bond investors and credit rating agencies. Acosta is being mentioned as a potential successor to Ferrer.

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