Puerto Rico said that it faces a $13 billion funding shortfall for debt payments over the next five years even after taking into account proposed spending cuts and revenue enhancement measures outlined in a long-awaited fiscal and economic growth plan. The report, crafted by Governor Alejandro Garcia Padilla’s administration and released today, said Puerto Rico will seek a consensual compromise with creditors to restructure its debt to avoid a legal morass that could further weaken the economy, according to materials provided in a press briefing. No estimates were provided of potential losses for the owners of Puerto Rico’s $72 billion in debt. The proposal paints a dire picture of Puerto Rico’s finances and the consequences to the island’s 3.5 million residents. The commonwealth will have only about $5 billion of available funds to pay $18 billion of principal and interest payments coming due from 2016 to 2020. That’s after anticipated savings from the consolidation of 135 public schools, reductions in health-care spending, additional subsidy cuts and reductions in payroll expenses. The estimate excludes the island’s electric and water utilities. The plan didn’t specify which of Puerto Rico’s various debt issuers would be restructured. Read more.
