Puerto Rico plans to propose a debt exchange to investors today, offering to swap existing bonds for two new types of securities to help the U.S. commonwealth alleviate its debt burden, the Wall Street Journal reported today. Both classes of debt would delay payments, allowing Puerto Rico time to make fiscal adjustments and spur economic growth: One would eventually pay interest at 5 percent, while the other would carry a value determined by the island’s fiscal health. Bondholders would be offered the first class of debt in amounts based on the relative legal priority of their holdings. Investors would then receive enough of the second class to make up the difference between that amount and the face value of their bonds. The first class would have interest payments beginning in 2018, rising to 5 percent in 2021, and principal due starting in five years. Payments on the second class could begin in 10 years, with creditors receiving up to 25 percent annually of commonwealth revenue that exceeds current projections. Read more. (Subscription required.)
In related news, the House Natural Resources Subcommittee on Indian, Insular and Alaska Native Affairs will hold a hearing on Tuesday at 11 a.m. ET titled “The Need for the Establishment of a Puerto Rico Financial Stability and Economic Growth Authority.”
Experts gather next week San Juan to discuss Puerto Rico's economic distress and other important cross-border insolvency topics at ABI's Caribbean Insolvency Symposium. Click here to register!
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
