Puerto Rico has reached a draft settlement with bondholders to restructure $ 18.8 billion in debt as part of an effort to come out of bankruptcy, its federal supervisory board said on Tuesday.
The proposed agreement with the Supervisory and Financial Management Board provides for an average reduction of 27% for holders of general obligations and an average reduction of 21% for holders of obligations of the Régie des Bâtiment Publiques, and reduces their claims on certain interest payments. If finalized, the debt settlement of bondholders would be reduced to $ 7.4 billion.
Holders of more than $ 11.7 billion in bonds back the deal, including traditional municipal investors and monoline bond insurers Assured Guaranty, Syncora Guarantee and National Public Finance Guarantee, as mediation continues with holders government employee pension system bonds of Puerto Rico, general unsecured debts, monoline bond insurers with clawback claims and creditors holding other claims against the government of Puerto Rico.
Supervisory board chairman David A. Skeel said in a statement that the deal puts Puerto Rico on the road to recovery. “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. ”
The supervisory board will present a restructuring plan next month based in part on the agreement with creditors and other agreements already reached with a group of retirees and some unions, as well as on the outcome of the ongoing mediation with d other groups of creditors.
Natalie Jaresko, executive director of the supervisory board, said in the statement that the reduction in annual debt service payments combined with a new debt policy adopted last year that restricts the issuance of additional debt “to avoid the mistakes of the past ”will establish sustainable debt levels and allow Puerto Rico to focus on structural reform and growth.
“All of this puts Puerto Rico on the path to renewed market access,” Jaresko said.
In a separate statement, several groups of creditors with a collective general obligation of $ 8.2 billion and claims on the PBA bonds approved the proposal agreement, which includes several concessions to creditors.
“This widely supported compromise will help Puerto Rico avoid years of costly and inconvenient litigation and finally accelerate the island’s long-awaited exit from bankruptcy in 2021,” they said.
“Creditors have agreed to take on more risk and align themselves more with Puerto Rico’s revitalization by taking part of their clawback in a contingent value instrument that only pays if the Commonwealth economy outperforms the budget plan. certified from May 2020, ”they said.
“We firmly believe that the new PSA (Puerto Rico Support Agreement) will help Puerto Rico continue to support its 3 million citizens in these difficult times while laying the foundations for a much brighter economic future,” they added. .
