P.R. Laws tit. 13, § 82
(a) The Secretary of the Treasury is hereby authorized to negotiate and execute with any bank, investment bank or securities issuing bank or other financial institution, provided they have (directly or through guarantees) a high credit classification (of not less than investment grade), one (1) or more qualified interest rate exchange agreements which the Secretary may determine to be for the best interests of the Commonwealth in relation to any other obligation of the Commonwealth, or otherwise, in relation to the management of the risks or costs of the Commonwealth related to the fluctuations in the interest rates, investments, changes in the level of prices or the credit risks of any obligation, or in relation to obtaining economic benefits equal to a reduction in the interest rates or in the service of the debt of the outstanding bonds so as to generate a profit for the Commonwealth of up to one hundred million dollars ($100,000,000) under the terms and conditions which the Secretary of the Treasury determines to be in the best interests of the Commonwealth.
(b) The Secretary of the Treasury may, from time to time, execute, modify, amend, sell or terminate one (1) or more qualified interest rate exchange agreements as the Secretary may determine to be necessary or desirable in relation to issuing, incurring, sustaining, refinancing or guaranteeing obligations. This authorization also includes the power to modify or revoke any qualified interest rate exchange agreement previously executed by the Secretary of the Treasury and the power to execute a qualified interest rate exchange agreement that would modify the method for computing the payment of the interest rate under any qualified interest rate exchange agreement previously executed to another method for computing the rate of interest or that revokes, in its totality or in part, the effect of a prior qualified interest rate exchange agreement regarding the risk or costs of the interest rates of the Commonwealth. A qualified interest rate exchange agreement executed by the Secretary of the Treasury may contain any clause, including clauses in relation to the payments, the terms, the cancellation payments, the guarantees and noncompliance and remedies, and may be executed with any other part as described in subsection (a) of this section that the Secretary may determine to be necessary or desirable.
(c) The Secretary of the Treasury shall not execute any qualified interest rate exchange agreements for anything other than for the main purpose of attending to the risks or costs related to the fluctuations in the interest rates, investments, changes in the level of prices or the credit risks of any obligation, or in relation to obtaining economic benefits equal to reductions in the interest rates or in the service of the debt of the outstanding bonds. A qualified interest rate exchange agreement may provide that the payments of the Commonwealth under said agreement be based on a method of computing the fixed or variable interest rate. The Secretary of the Treasury may not perform functions as a broker or assume any other similar role regarding qualified interest rate exchange agreements nor shall he/she enter into such agreements for the purpose of financial speculation. A qualified interest rate exchange agreement may be executed in relation to specific obligations of the Commonwealth, which may consist of multiple series or issues of obligations as specified by the Secretary of the Treasury. A qualified interest rate exchange agreement may be executed previously to, concurrently with or subsequently to the issue of or to the date of incurring in the obligations of the Commonwealth with which said agreement is related. Every qualified interest rate exchange agreement may be executed for a nominal amount of up to, but without exceeding, the amount of the principal (or its equivalent) of the obligations with which said qualified interest rate exchange agreement is related. The term of a qualified interest rate exchange agreement may be as long as or less than the term of the obligations with which said qualified interest rate exchange agreement is related.
(d) In relation to the execution of a qualified interest rate exchange agreement, the Secretary of the Treasury may execute credit quality improvement agreements or credit guarantees reinforcement agreements to guarantee the obligations of the Commonwealth under said qualified interest rate exchange agreement under any terms for payment, security, noncompliance, remedy or other terms and conditions the Secretary of the Treasury may determine, including the execution of agreements under which he/she commits him/herself to deliver collateral, be it at the time in which the qualified interest rate exchange agreement is executed or in the future under the conditions stipulated in the qualified interest rate exchange agreement.
All actions of the Secretary of the Treasury under the provisions of this chapter may only be carried out after consulting the Government Development Bank for Puerto Rico and, should the Secretary so determine, an independent financial advisor. Said actions must be consistent with the Interest Rate Risk Management Policy Statement adopted by the Government Development Bank for Puerto Rico, and in the judgment of the Secretary of the Treasury, shall serve the best interests of the Commonwealth.
History —Aug. 1, 2005, No. 39, art. 3, § 1; May 9, 2006, No. 84, § 1.