Accessibility links

Breaking News
USA

Roadmap for Puerto Rico's Exit From Bankruptcy Filed in US Court


FILE - Chairman of the Federal Fiscal Control Board Jose Carrion, center, attends a meeting of the Financial Oversight and Management Board for Puerto Rico in San Juan, Puerto Rico, Oct. 31, 2017.
FILE - Chairman of the Federal Fiscal Control Board Jose Carrion, center, attends a meeting of the Financial Oversight and Management Board for Puerto Rico in San Juan, Puerto Rico, Oct. 31, 2017.

Puerto Rico would reduce its core government debt by more than 60% under a restructuring proposal the bankrupt U.S. commonwealth's federally-created financial oversight board filed in court Friday.

The so-called plan of adjustment covering $35 billion of bonds and claims and more than $50 billion of pension liabilities would allow Puerto Rico to exit a form of bankruptcy that commenced in May 2017 if approved in U.S. District Court.

"Today we have taken a big step to put bankruptcy behind us and start envisioning what Puerto Rico's future looks like under fiscal stability and economic sustainability," the oversight board's chairman, Jose Carrion, said in a statement.

Owners of bonds issued by Puerto Rico, its Public Buildings Authority and Employees Retirement System would face haircuts on their initial investments ranging from 28% to 87%.

The board, meanwhile, is trying to void over $6 billion of general obligation bonds sold in 2012 and 2014 on the basis they were issued in violation of Puerto Rico's constitutional debt limit. The plan includes a settlement mechanism for challenged bonds.

Annual debt service would be reduced to 9% of government revenue from 28%, according to the board.

The plan creates an independent reserve trust for Puerto Rico's pay-as-you-go public sector retirement system. Monthly pension payments totaling over $1,200 would be cut by 8.5%, affecting about 40% of retirees.

So far, Puerto Rico has won court approval for debt restructurings for its Government Development Bank and Sales Tax Financing Corporation known as COFINA. The Puerto Rico Electric Power Authority moved closer to exiting bankruptcy earlier this month when two holdout bond insurers joined a deal to restructure its debt.

  • 16x9 Image

    Reuters

    Reuters is a news agency founded in 1851 and owned by the Thomson Reuters Corporation based in Toronto, Canada. One of the world's largest wire services, it provides financial news as well as international coverage in over 16 languages to more than 1000 newspapers and 750 broadcasters around the globe.

XS
SM
MD
LG