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Virgin Islands bond deal a blast in Caribbean rum war
From Reuters
A $250 million bond issue the U.S. Virgin Islands Public Finance Authority plans to bring to the municipal market next week is the latest sally in a Caribbean rum war with Puerto Rico over federal tax rebates.
The issue will finance a $165 million rum plant in St. Croix and related expenses for drinks giant Diageo PLC (DGE.L), which will shift production of its Captain Morgan Rum from Puerto Rico to the USVI after a contract with Puerto Rican rum producer Destileria Serralles runs out in 2012.
Underwritten by JPMorgan and Citi, the deal includes $80 million to $100 million annually in benefits for the firm, or about half the USVI's anticipated annual take from a federal rebates program the two U.S. territories share.
Coming when Puerto Rico is battling recession and big government budget gaps, Diageo's move will cost the U.S. commonwealth some $130 million annually in rum rebates. Last year, Puerto Rico received $370 million and the U.S. Virgin Islands $80 million under the program.
In response, Pedro Pierluisi, Puerto Rico's resident commissioner, or nonvoting representative to Congress, proposed legislation seeking to establish a special rule blocking Puerto Rico and the Virgin Islands from using rum rebates to provide "unreasonable" subsidies to rum producers. >>> Go to Full Story >>>
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