Elizabeth Warren Rips the Obama Administration on Puerto Rico

After months of facing indifference from Congress, the people of Puerto Rico might finally be making progress on getting some help with the island's massive debt crisis from both the Obama administration and Congress.

Last Wednesday, the Obama administration outlined a proposal that would allow the island's entities to restructure debts, provide "independent financial oversight" to ensure Puerto Rico sticks to a financial recovery plan, reform the unequal treatment of Puerto Rico under Medicaid, and allow Puerto Rico access to the Earned Income Tax Credit.

The next day, Puerto Rico Gov. Alejandro García Padilla, Rep. Pedro Pierluisi, and representatives from the Treasury Department testified before the Senate Committee on Energy and Natural Resources. García Padilla said steep cuts to public services had already been made, but that if nothing were done, the island would run out of money next month. Committee chair Sen. Lisa Murkowski (R-Alaska) agreed that something needed to be done but wasn't convinced that Congress had been given accurate data with which to make decisions.

Sen. Elizabeth Warren, (D-Conn.), a member of the committee, spoke out strongly in favor of Pierluisi's Chapter 9 proposal. Warren threw her support behind the proposal earlier this summer and was a cosponsor on the Senate's version of a Pierluisi's House bill. Criticizing the debt holders—which she repeatedly called "vulture funds"—she pressed on the Treasury Department to "be just as creative in coming up with solutions for Puerto Rico as it was when the big banks called for help."

"I think Treasury needs to step up and show more leadership here," she said. "During the financial crisis, when the banks were in trouble, Treasury did a lot more than just bail them out. Treasury stretched the limits of its authority to make sure that the banks stay afloat. It helped broker deals between banks, it applied pressure to get parties to accept deals they may not have liked very much. It has done that in multiple other crises as well, and now the people of Puerto Rico are calling." Watch the full statement:



Puerto Rico's finances have been in disarray for the better part of a decade. Years of poor financial decisions, compounded by the worldwide recession and the structural inequity of Puerto Rico's colonial relationship with the United States, have resulted in Puerto Rico's economy shrinking by 10 percent, the loss of 250,000 jobs, and more than 300,000 people leaving the island since 2006. In the last year alone, according to the Obama administration, 84,000 people have emigrated to the United States.

Things went from bad to worse this summer when the island's governor announced that Puerto Rico's debts could never be repaid and that the island was in an economic "death spiral." Under current US law, Puerto Rico's public institutions and cities are not allowed to restructure debt under US bankruptcy laws. Unlike the high-profile bankruptcies of Detroit and Jefferson County, Alabama, Puerto Rico's economy was at the mercy of its lenders and hedge fund investors. The island governor's announcement triggered fears that the island's economy would collapse and rattled world economic markets.

But as the summer went on, lenders didn't show any signs of giving in, and pleas for US congressional intervention went unanswered. Rep. Pedro Pierluisi, the island's non-voting representative to Congress, said the only long-term solution was to make Puerto Rico a state instead of the commonwealth it is today. Short of that, he asked lawmakers to pass legislation that would give Puerto Rico the ability to declare bankruptcy. But the bill went nowhere. Hedge funds and other debt holders had their own solutions to the crisis. They called on the island government to get better at collecting taxes and to close schools and lay off teachers, arguing that the school system is bloated.

The fact that the Obama administration has finally come out with a plan could help move this idea along. And although it's not an official bailout, the administration's suggestions for assisting Puerto Rico might provide some impetus to advance stalled proposals already on the table.

"Puerto Rico, and the 3.5 million American citizens who call the island home, are facing a serious crisis that requires immediate congressional action," US Treasury Secretary Jacob Lew, National Economic Council Director Jeff Zients, and Health and Human Services Secretary Sylvia Mathews Burwell said in a joint statement on Wednesday night. "Puerto Rico has already taken drastic steps to address its fiscal crisis, but more action is required."



By AJ Vicens

Elizabeth Warren Rips the Obama Administration on Puerto Rico

New oral health provider sets dentists' teeth on edge | Marketplace.org

When you live in a state like Vermont — population 625,000 — you tend to know lots of people, and lots of people know you.

“It’s your name on the sign, you are the one that’s held liable for all that occurs in the office,” said Dr. Judith Fisch, who now co-runs the family practice in Rutland, Vermont, that her father-in-law started back in 1962.

For six years, Fisch and most of the nearly 400 dentists here have fended off efforts to license dental therapists.

The idea behind dental therapists — who fall between a hygienist and a dentist — is that these new midlevel providers would swell the ranks of people who can drill, fill and extract, making it easier for people to care for their teeth.

That’s not how Fisch and many dentists around the country see it.

Critics drill the American Dental Association and local dental societies for protecting their turf.

But Fish said she’s not concerned about competition, she’s focused on the 3,500 people who come to the office every year.

“I care very much about my patients,” she said. “I would not be comfortable with my patients receiving their care from someone with less, or, in my opinion, an inadequate level of training.”

Under the bill in Vermont, a student must train for four years and receive 1,000 hours of direct supervision from a dentist.

Despite her opposition, Fisch and her colleagues may be losing ground. This summer, the agency that accredits dental schools is creating guidelines to train therapists, taking the bite out of patient safety arguments. And advocates convinced the Vermont Senate that, for too many people, it’s too hard to get a dental appointment.

But as the bill moves to the House, Dr. Stephen Pitmon said lawmakers will understand this whole idea is simply impractical.

“If I have a dental therapist who can only remove a very loose, wiggly tooth that’s blowing in the wind, but that patient needs two or three other teeth extracted, how is it efficient for the dental therapist to go in and take out the one tooth and then I need to come in and take out the next two teeth,” he said.

Pitmon and Fisch said if the goal is to make it easier for people to get dental care, then the state should pay dentists more to care for the poor.

As far as therapists go, Fisch suspects it would only bring headaches.

“All this energy and finances and time being put into something that — are we getting anywhere, are we solving anything?” she said.

In Minnesota — the only state that’s licensed therapists — waiting times for dental care went down and more people on Medicaid got appointments.

More than 10 states have introduced dental therapy legislation. And dentists have geared up. When they believe something is bad for their patients — or themselves — they will remind lawmakers again and again: It’s their name on that shingle.

Dan Gorenstein

Dr. Judith Fisch and Dr. Stephen Pitmon

by Dan Gorenstein

New oral health provider sets dentists' teeth on edge | Marketplace.org

Moody's: US initiatives could help Puerto Rico's fiscal recovery and debt restructuring

While the United States (Aaa stable) is unlikely to provide a financial bail-out for Puerto Rico (Caa3 negative) as the territory tries to restructure some of its $73 billion in debt, media reports suggest the US Treasury Department is considering taking a more active role, Moody's Investors Service says, as the deteriorating fiscal situation leads to increasing pressure on Congress to take actions to stabilize the island's economy or finances.

"A combination of federal initiatives could encourage Puerto Rico's return to solvency and market access with little or no incremental cost to US taxpayers beyond current levels of support," Vice President -- Senior Credit Officer Ted Hampton says in "Puerto Rico (Commonwealth of):Deepening Fiscal Crisis Might Prod US Intervention."

Current proposed legislation to amend the bankruptcy law would authorize Puerto Rico's public corporations to file for Chapter 9 bankruptcy protection if they can demonstrate insolvency. While corporations like the Puerto Rico Electric Power Authority (PREPA -- Caa3 negative) and Puerto Rico Highways and Transportation Authority (PRHTA -- Ca negative) would likely qualify under the legislation, almost 80% of Puerto Rico's debt probably would be ineligible for restructuring under Chapter 9, unless the legislation was to be broadened in scope.

Some in Congress have also suggested implementing a federal financial control board to put the commonwealth on a path to fiscal health. However, this is likely to meet heated opposition in Puerto Rico since the commonwealth has governed itself for many years. Congress instituted a control board for the District of Columbia (Aa1 stable) in 1995.

The treasury is reportedly considering a "superbond" proposal, where the US Treasury would hold certain pledged commonwealth revenues in trust for payment on debt service on newly issued securities.

Hampton says if a "superbond" came to fruition along with a financial control board, it could accelerate the restructuring negotiations.

Other measures to provide relief for Puerto Rico without burdening US taxpayers include loosening federal minimum wage requirements, or granting the commonwealth's employers a reprieve in future minimum wage increases. Congress could also exempt Puerto Rico from Jones Act shipping restrictions.

Moody's says the largest and most immediate impact would be stabilizing current federal healthcare funding on the island, which is scheduled to decline in coming years even as the share of citizens participating in Medicaid is higher in Puerto Rico (48%) than in any US state.

"However, any actions by the federal government will take time to implement," notes Hampton, "given the current partisan gridlock in Congress and a lack of transparency on the commonwealth's finances."

Moody's also notes that even as the commonwealth faces a liquidity crisis and potential new defaults, Congress is less likely to offer Puerto Rico assistance if it encumbers US taxpayers.

The report is available to Moody's subscribers at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1008279.



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Moody's: US initiatives could help Puerto Rico's fiscal recovery and debt restructuring

The Economic and Budgetary Outlook for Puerto Rico: A Primer

Introduction

Puerto Rico’s governor Alejandro García Padilla has declared that the Commonwealth’s debts are “not payable” and that the Island is confronting a “death spiral.” This has generated greater media and policymaker attention on the economic and fiscal conditions confronting Puerto Rico, and possible solutions to those challenges.

The Commonwealth’s difficulties pose interesting challenges to federal policymakers. A default by the Commonwealth on its debts would directly impact its creditors and investors. However, it would also impose hardship on nearly 4 million Puerto Rican American citizens. Should the Commonwealth’s struggles persist, the current outmigration of the Puerto Rican population to the U.S. mainland will continue or accelerate, and economic conditions on the island will deteriorate.

This primer seeks to describe the economic and budgetary context; specifically the historical and recent trends as well as the projected trajectory for the Commonwealth’s economy and budget. This is an essential first step in order to properly evaluate the policy proposals that could ameliorate Puerto’s Rico outlook.  An examination of the economic and budgetary woes confronting the Commonwealth reveals that its challenges have been long in coming and cannot be assigned to any specific federal policy such as shuttering of federal facilities or changes in highly preferential tax policies. Such an examination also reveals that while the island’s challenges are substantial, fundamental structural changes at a local level and sensible changes from the federal government to allow for economic growth would go a long way to promote a Puerto Rican recovery and a sustainable budgetary trajectory. In a forthcoming piece, we will examine policy prescriptions for the island.

Economic Outlook

The Puerto Rican economy has been in steady decline for over a decade, which has and will continue to exacerbate the Commonwealth’s fiscal challenges. The strict mathematical and practical reality is that any sustainable solution to Puerto Rico’s must involve an economic growth component that boosts output, employment rolls, and income.

Economic Output

Figure 1: Historical and Projected Output

Puerto Rico has seen real output plummet since 2005, while Moody’s predicts essentially stagnant territorial income for the next decade. This growth assumption incorporates an expectation of the inability of the Commonwealth to strike the proper balance between fiscal consolidation and economic growth. Pure austerity – poorly targeted tax increases and indiscriminate cessation of services – would have anti-growth effects and could contribute to tepid growth in the future, while more innovative fiscal consolidation approaches could be buttressed by enhanced revenues from stronger growth.

Figure 2: Unemployment

The unemployment peaked in 2010, with an increase of nearly 50 percent from 2005. While this high rate of joblessness has attenuated, it is projected to remain at persistently high levels – averaging nearly 13 percent over the next 10 years.

Figure 3: Labor Force Trends

A key contributor to Puerto Rico’s economic challenge has been net emigration. Over 300,000 Puerto Ricans have left since 2005, with net emigration and population decline expected to persist for the next decade, albeit at a slower pace. This has significantly curtailed the Commonwealth’s labor force as a whole. Despite a declining population, the labor force participation rate has declined apace, highlighting structural weakness in labor markets beyond net emigration.

Figure 4: Employment

Echoing other indicators of the labor markets, payrolls have declined precipitously in the past ten years, while a policy-agnostic outlook assumes flat employment levels over time. Stable payrolls however, compared to recent experience, are a positive sign and could provide policymakers with a predictable wage and tax base in the contemplation of future fiscal policies.

Figure 5: Total Personal Income

Personal Income growth has remained under 3 percent since 2008 and is projected to average about 2 percent over the next 10 years. While far from ideal, stable income growth paired with steady payrolls could again provide a predictable wage and tax base around which to design pro-growth, fiscal consolidation.

Summary of Economic Outlook

Every major economic indicator of Puerto Rico’s economic wellbeing shows a Commonwealth in a protracted retrenchment.  However, there are indications that major emigration flows and steep economic declines may have passed, leaving a trajectory of tepid though predictable growth. How Puerto Rico addresses its fiscal challenges, however, could radically alter this outlook for good or for ill.

Budget Outlook

By any objective measure, the budget outlook for Puerto Rico is troubling. The Commonwealth, through policy choices compounded by economic difficulty, has seen its debt obligations grow inexorably over the past decade and is projected to continue.  Addressing these dual challenges is essential to an improved budgetary trajectory. This necessity must also reconcile immediate concerns over liquidity with the need for longer-term structural reforms.

Historical and Recent Developments

Puerto Rico has maintained structural deficits for some time, driven by economic conditions, policy choices, and unrealistic revenue and expenditure estimates.[1] Accounting for timing shifts and non-recurring budget events, structural deficits have been and will remain considerable.

Figure 6: Structural Deficits

Figure 7: General Fund Debt Service Burden

With persistent borrowing, debt service has grown as a share of general fund expenditures. More indicative of a borrower’s ability to repay debt however, is debt service as a share of revenues. This simple metric incorporates many elements that signal a borrower’s wherewithal to manage debt: interest reflects not only past borrowing, but the terms and credit worthiness of the borrower demonstrated by the interest rate underlying debt service costs; revenue reflects the strength of the economy and the ability of a government to harness national resources through tax policy. A common bright-line for identifying distressed sovereign borrowers is when interest exceeds 10 percent of revenues. The Commonwealth reached this level as of March 2015.

Figure 8: Public Debt

General fund debt has risen rapidly, but is only part of the problem. Puerto Rico’s debt portfolio is largely driven by entities other than the central government. The Commonwealth’s public sector debt has more than tripled over the last 15 years, rising to over $72 billion today.[2] The composition of this debt however, is instructive, and reveals the complicated nature of financing the Commonwealth’s expenditures.

Table 1: Composition of Public Debt[3]

As of June 2015, the public sector debt for Puerto Rico stood at $71.1 billion. Over $48 billion of this total is attributed to debt issued by Puerto Rico’s public corporations[4].

Table 2: Debts of Public Corporations

These entities provide public and business-like services to Commonwealth residents, with the bulk of the indebtedness comprised of debt of the Sales Tax Financing Corp (COFINA), which in itself was originally created to finance existing debts; the Island’s power utility (PREPA), which has recently agreed to a restructuring of some of its mature obligations; the Highway and Transportation Authority (PRHTA); the Aqueduct and Sewer Authority (PRASA); and the Public Buildings Authority (PBA).

Table 3: Bond Ratings of Public Corporations

The major ratings agencies have continuously downgraded the general obligations of the Commonwealth as well as issuances of Puerto Rico’s principal public corporations, which are rated below investment grade by Fitch, Moody’s and S&P.[5]

Near Term Challenges and Outlook

Prospectively, the Commonwealth faces significant challenges in both the near and long term. Of most immediate concern is the claim that Puerto Rico is facing a liquidity crisis, and will be unable to meet its payment obligations beginning in November of this year.[6] 

The financial advisor to the Government Development Bank for Puerto Rico estimates that this cash constraint will persist through December before improving until June.  At that point Puerto Rico is again expected to face a liquidity challenge. It is important to note that this advisor also expects that the Commonwealth will be able to manage the immediate challenge. Moreover, the June challenge does not appear insurmountable, as the cash flow analysis that underpins the June shortfall assumes certain payments that should not take priority over existing obligations such as deferred tax refunds and “economic development fund” expenditures. Given these near term challenges, taking action to address the budgetary challenges and economic growth on the island is imperative.

Longer Term Challenges

As noted above, the GDP outlook is poor, with growth remaining depressed over the foreseeable future. The Commonwealth’s future financing gap is also a source of serious concern.

Figure 9: Projected Borrowing Needs

According to a recent estimate by former first deputy managing director of the International Monetary Fund, Anne Krueger and others, under current policy and accounting for other factors, the Commonwealth faces a financing gap of over $64 billion over the next 10 years.[7] Under current conditions, capital markets are highly unlikely to supply this financing to the Commonwealth. Accordingly, long-lasting and meaningful policies must be pursued to confront the duel challenge of tepid growth and an unsustainable fiscal outlook and assure future access to capital markets.

Conclusion

The Commonwealth of Puerto has long struggled with tepid economic growth, while continuing to issue debt at multiple layers of administration. These factors have conspired force the Commonwealth into a series of reform initiatives that have as yet proven inadequate to fundamentally alter the island’s flat growth prospects and deteriorating labor force trends, nor the structural imbalances in Puerto Rico finances, which if left to persist indefinitely would require unrealistic future borrowing. It is in this context that policy options for the Commonwealth must be evaluated. Policy options that would fundamentally put Puerto Rico on a sustainable path and promote much-needed growth may be difficult to implement, but they will be necessary to get the island back on its feet financially.

---

[1] http://www.bgfpr.com/documents/puertoricoawayforward.pdf

[2] http://www.bgfpr.com/documents/CommonwealthQR-5-7-15.pdf

[3] 

This reflects most of what comprises the Commonwealth’s debt. For specific exclusions, see footnotes 1& 2 on page 63 of: http://www.bgfpr.com/documents/CommonwealthQR-5-7-15.pdf

[4] http://www.bgfpr.com/documents/PuertoRicoFiscalandEconomicGrowthPlan9.9.15.pdf

[5] http://www.bgfpr.com/documents/SupplementtoQuarterlyReport6-30-15.pdf

[6] http://www.bgfpr.com/documents/150825ConwayMacKenzieLiquidityUpdateReport.pdf

[7] http://www.bgfpr.com/documents/puertoricoawayforward.pdf

• Download PDF Version

By Gordon Gray, Douglas Holtz-Eakin, Curtis Arndt

The Economic and Budgetary Outlook for Puerto Rico: A Primer | Research | American Action Forum

Lead Poisoning Hazards in Homes and Buildings across Puerto Rico

According to the Centers for Disease Control and Prevention (CDC), no safe blood lead levels in children have been identified and yet at least 4 million households have children living in them that are being exposed to high levels of lead.  In fact, the CDC reports that there are approximately half a million U.S. children ages 1-5 with blood lead levels above 5 micrograms per deciliter, the reference level at which the agency recommends public health actions be initiated.

Lead-based paints are the primarily culprit and were used frequently up until 1978 when they were banned for use in housing. Unfortunately, many homes and buildings across Puerto Rico still have them.  The past use of these paints, both inside and outside of buildings, poses an ongoing threat to both children and adults as the paints deteriorate or are disturbed during demolition or remodeling activities.

“It is a good idea to test and inspect paint and dust samples from all properties built before the lead-based paint ban went into effect,” said Harry Pena, President of Zimmetry Environmental.  “These paints could be on everything from walls and ceilings to furniture, toys and old tiles.  Even the plumbing in some properties could be exposing people to elevated levels of lead so testing the water in older structures is also highly recommended.  In fact, in Puerto Rico if a property was built before 1978, regulations require that all buildings that are going to be demolished or renovated need to be inspected for the presence of lead.”

Lead poisoning is an entirely preventable condition when people are informed of what they are being exposed to in their homes, schools and work environments.   The building science professionals at Zimmetry offer lead testing and consulting services to allow the general public and companies to identify potential hazards associated with exposure to this toxic heavy metal and to comply with existing regulations.  Zimmetry has also sponsored an online video about ways to protect children from exposure to lead that can be seen at: http://youtu.be/LkEqFhNDS-U

To learn more about Zimmetry Environmental and their lead, indoor air quality (IAQ), environmental, occupational and compliance consulting services, please visit www.zimmetry.com, call (787) 995.0005 or email info@zimmetry.com .

About Zimmetry Environmental

Since 2002, Zimmetry Environmental has been providing environmental consulting services to building owners and managers, architects, engineers, EHS professionals and Fortune 500 companies.  The company is based in Puerto Rico and provides services across the Caribbean and Central America.  The professionals at Zimmetry offer environmental compliance, indoor air quality, asbestos, lead-based paint, Phase I ESAs and general environmental consulting services.

( Press Release Image: http://photos.webwire.com/prmedia/12710/200428/200428-1.jpg )

Zimmetry Environmental provides testing, consulting and compliance services to identify lead hazards in commercial and residential properties.

Lead Poisoning Hazards in Homes and Buildings across Puerto Rico

Puerto Rico May Not Be Able to Avoid Defaults, Adviser Says [Video] * * * * *

Puerto Rico, at risk of running out of cash as soon as November, may be unable to pay investors as it looks to restructure $73 billion of debt, said Steven Rhodes, the former U.S. bankruptcy judge who is advising the island’s government.

Puerto Rico faces a $354 million principal and interest payment on Dec. 1 for Government Development Bank debt, including securities that the commonwealth backs with its general-obligation guarantee, according to bond documents. Officials have said the government may run out of cash in November unless it can get a short-term loan or renegotiate its debts. A $357 million interest payment on general-obligation bonds is due Jan. 1.

“I’m not sure that Puerto Rico will have any choice on the issue of default,” Rhodes, who presided over Detroit’s record bankruptcy, said in a television interview Friday on "Bloomberg <GO>" withDavid Westin and Stephanie Ruhle. “Its financials suggest that it is going to run out of money very soon. It is suffering a liquidity crisis, and I’m not sure it will have any choice in the issue of default.”

Puerto Rico and its agencies racked up $73 billion of debt by borrowing for years to balance budgets as the economy struggled to grow. Officials are negotiating with investors and insurance companies about what’s owed by the development bank, and Governor Alejandro Garcia Padilla’s administration plans to push for a broader restructuring of Puerto Rico’s bonds.

The price of Puerto Rico’s bonds has slid this year amid speculation over how much debt will be affected. Securities due in 2035, the most frequently traded, changed hands Friday at an average of 74.5 cents on the dollar to yield 11.2 percent. They were first sold to investors for 93 cents in March 2014.

The Electric Power Authority, the island’s main electric utility, has struck a tentative deal with some of its bondholders and lenders to restructure the $8.3 billion it owes. Bond insurance companies have balked at the proposed agreement and are still negotiating.

The outcome could serve as a model for how to deal with other Puerto Rico debts, Tom Wagner, co-founding partner of hedge fund Knighthead Capital Management, said Friday during a Bloomberg Television interview. Knighthead owns the utility’s bonds.

“A constructive and collaborative approach between the debt issuer and the debt holders is oftentimes the best way to approach these situations,” Wagner said.

Rhodes said he disagrees. Given how many Puerto Rico agencies have sold bonds and the number of creditors involved, the island needs a way to swiftly tackle its fiscal crisis and avoid talks that could drag on for years, he said. Puerto Rico has been pushing for Congress to give some agencies the power to file for bankruptcy, though a bill to do so has stalled for lack of Republican support.

“How long is it going to take if there are 17 entities and we do them one year at a time?" Rhodes said. “We don’t have that time. We’re closing schools. Seniors need their pensions in order to buy their medicines.”

If Puerto Rico fails to repay the development-bank bonds due Dec. 1, it would be the first default on debt guaranteed by the commonwealth. While one of its agencies, the Public Finance Corp., has skipped payments on its bonds since August, those securities were only backed by legislative appropriations, which lawmakers didn’t authorize.

Michelle Kaske

Puerto Rico May Not Be Able to Avoid Defaults, Adviser Says

Sirona Dental and Dentsply to Combine

Dental-products companies and Dentsply International Inc. have agreed to combine in a stock-swap transaction billed as a merger of equals.

The companies said Tuesday that Dentsply shareholders will own 58% of the combined business. The merged entity will have an implied pro forma equity value of about $13.3 billion.

Before the deal announcement, Sirona had a market value of about $5.55 billion, while Dentsply was valued at about $7.6 billion.

York, Pa.-based Dentsply and Sirona said the deal will form the world’s largest maker of dental products and technologies, and will help them capitalize on growth trends including a move toward “digital dentistry.”

Jon Santemma, Global Head of Healthcare Investment Banking at Sirona’s adviser Jefferies LLC, said the deal is “the largest M&A transaction in the dental space ever.”

Sirona stockholders will get 1.8142 of a Dentsply share for each Sirona share. Based on 4 p.m. stock prices, the deal values Sirona at about $98.60 per share. The shares closed at $99.31, up $1.22. In after-hours trading, Sirona was up four cents while Dentsply fell 5.8%.

Sirona President and Chief Executive Jeffrey T. Slovin will be CEO of the merged company. Dentsply Chairman and Chief Executive Bret Wise will be executive chairman.

The transaction is projected to result in annual pretax savings of $125 million by the third year after closing, which is expected in the first quarter of calendar 2016.

Dentsply posted lower second-quarter revenue amid currency headwinds, but said on July 30 that it had strong momentum and increased its full-year earnings guidance to $2.54 to $2.62 a share from $2.50 to $2.60. The company said the merger will add to adjusted earnings per share within the first year.

Sirona reported higher revenue and earnings for its third quarter ended June 30 and reaffirmed earnings guidance for the year. Sirona’s products include CAD/CAM restoration systems, X-ray products, dental chairs and instruments.

Sirona was spun off from Siemens AG in 1997 and merged with Schick Technologies Inc. in 2006. The company develops and manufactures the majority of its products in Bensheim, Germany, and its U.S. headquarters is in Long Island City, N.Y.

Dentsply provides consumable health care products for dental and other health care markets. Its brands include Cavitron, Nupro and Rinn.

Dentsply had net sales of $2.92 billion last year. Sirona reported revenue of $1.17 billion for the year ended Sept. 30, 2014, and previously projected organic local-currency growth of 6% to 8%.

Write to Josh Beckerman at josh.beckerman@wsj.com

By Josh Beckerman

Sirona Dental and Dentsply to Combine