The State Insurance Fund recently signed off on a $242 million loan from Banco Santander Puerto Rico to refinance a prior loan that was in default and for ongoing improvements planned at the government agency.
In November 2006, the SIF took out a $253 million loan from the Government Development Bank, which as per Law 249, the agency had to pay off in its entirety, including interest. However, the SIF did not use the money, which instead was split between $203 million for the Health Reform program and $50 million for the Medical Services Administration, known as ASEM for its Spanish acronym.
“This administration realized that the loan was in default, as the SIF never made any payments,” said SIF Administrator Zoimé Álvarez-Rubio. “As a result, the current administration was forced to pay about $30 million to bring the loan current, thus avoiding affecting Puerto Rico’s credit and we entered into a new agreement with the GDB, which allowed the SIF to find alternatives from private banking to refinance the debt.”
As a result of the new loan, the SIF will save $10,547 in daily interest rates, which translates into more than $3.8 million a year, she said.
For Santander de Puerto Rico, the transaction with the SIF represent the biggest financing agreement granted to a government agency in recent years, said Javier Hidalgo, president of the Spanish banking institution with long-standing presence on the island.
“Through this significant financing transaction, Santander not only reiterates its firm commitment to strengthening the island’s economy, but also supports the mission of the State Insurance Fund to contribute to the welfare of the Puerto Rican working class,” Hidalgo said.
The new credit facility consists of two years of interest-only payments, followed by a 15-year amortization. A portion of the SIF’s investment portfolio will serve as collateral for the loan.
“This transaction is the product of close collaboration between the public and private banks in which, as in any good business, both parties have benefited,” Álvarez-Rubio said.
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