Governor of Puerto Rico rejects key deal with creditors to reduce debt amid reduced pensions
The governor of Puerto Rico announced on Tuesday that a federal board of control had reached a key deal that would reduce the overall debt of the US territory by almost 80%, but that his administration was rejecting it because it would require cuts to the pension system ruined public of the island.
The standoff between the governor and a board of directors that oversees Puerto Rico’s finances threatens to throw into limbo attempts to end a bankruptcy-like process for a government that six years ago said unpayable its public debt of more than 70 billion dollars.
The deal was made with creditors who hold general bond and Public Building Authority bonds sold by the government of Puerto Rico and would resolve $ 35 billion in non-debt claims and receivables, according to board of directors. It would also reduce the debt held by these creditors from $ 18.8 billion to $ 7.4 billion, a reduction of 61%, and provide them with $ 7.4 billion in bonds and $ 7 billion in cash, among others.
The board said the deal would free up more than $ 300 million a year for government services, and that instead of 30 cents for every dollar in taxes and fees the government of Puerto Rico collects from creditors , that would be less than 8 cents.
“I firmly believe that this is the best result we can achieve in the current economic uncertainty, not only for the people of Puerto Rico but also for the creditors who have an interest in the long term viability and solvency of Porto. Rico, ”said Chairman of the Board, David Skeel.
Governor Pedro Pierluisi, however, does not agree.
He said in a statement that while the deal is positive in many ways for Puerto Rico, his administration does not support the deal due to go to court next month and requires final approval by a federal judge. overseeing the bankruptcy process.
“The adjustment plan should not be structured in a way that affects our retirees even more,” he said.
Pierluisi added that finalizing the restructuring of part of Puerto Rico’s debt is a priority for his administration, but not at the expense of retirees: “Putting the bankruptcy process behind us is a fundamental step towards recovery and economic development of our island.
Puerto Rico has racked up debt after decades of mismanagement, corruption, and excessive borrowing to balance budgets. A former governor declared it unpayable in 2015, then two years later the government filed for the largest US municipal bankruptcy in history.
Authorities are now restructuring some of that debt amid an almost 15-year economic crisis that worsened after Hurricane Maria, a series of strong earthquakes that struck a year ago and the pandemic In progress.
The creditors groups involved in the deal hold more than $ 11 billion in bonds. Those who hold more than $ 8 billion of those bonds have said they have made a good faith commitment with the board to provide Puerto Rico with the financial flexibility it needs to recover from the pandemic.
“This widely supported compromise will help Puerto Rico avoid years of costly and inconvenient litigation and ultimately accelerate the island’s long-awaited exit from bankruptcy in 2021,” they said in a statement.
The board said mediation is continuing with creditors who hold other types of bonds, including those of the employee pension system.