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 nearly 80%, but that his administration is 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 process for a government that six years ago declared its unpayable payment. public debt of over $ 70 billion.
The deal was reached with creditors who hold general bond bonds 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 the board. It would also reduce the debt held by these creditors from $ 18.8 billion to $ 7.4 billion, a 61% reduction, and provide them with $ 7.4 billion in bonds and $ 7 billion in cash, among others.
The council 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, this would be less than 8 cents.
“I firmly believe that this is the best result we could achieve in the current economic uncertainty, not only for the Puerto Rican people but also for creditors who are interested in the long term viability and creditworthiness of Puerto Rico. Said Chairman of the Board, David Skeel.
Governor Pedro Pierluisi, however, disagrees.
He said in a statement that while the deal is positive in many ways for Puerto Rico, his administration does not support the deal which is due to go to court next month and requires final approval from a supervising federal judge. the bankruptcy process.
“The adjustment plan should not be structured in such a way as to affect 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 bankruptcy for the largest US municipal bankruptcy in history.
Authorities are currently 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 transaction 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 distracting litigation and finally 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 in the employee pension system.
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