US - Puerto Rico's Employees Retirement System (ERS) has issued $4.3bn in senior pension funding bonds in a bid to significantly reduce the unfunded liability of the system.
The bonds will be offered in two parts, with about $1bn series A bonds scheduled to be sold in the local Puerto Rico market the week beginning 21 January, and the remainder to be sold globally as series B shortly after.
In addition, Puerto Rico Supreme Court decisions have provided protection against the commonwealth legislature lowering the 9.275% statutory contribution rate that is assumed in the sizing of the bond program.
The bonding programme mitigates what has been a significant concern for the commonwealth, as disbursements from the system in recent years have exceeded contributions and investment income, resulting in a risk the system would run out of funds within the next ten years.
The current and planned pension funding bond offerings are designed to bring the funding ratio of the system from about 19% to about 70%.
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