Puerto Rico should avoid a potentially prolonged legal battle with bondholders by negotiating a reduction to its $70 billion debt, Bloomberg reported yesterday. New Progressive Party gubernatorial candidate Ricardo ‘Ricky’ Rossello said that the Puerto Rico Electric Power Authority’s December deal with creditors — under which bondholders consented to a 15 percent loss — is a model for how the U.S. territory can reduce what it owes. Gov. Alejandro García Padilla has advocated for such a voluntary reduction, although he has pushed for power to cut the debt in court to put pressure on creditors. Rossello said that the commonwealth’s debt “can be paid” and clarified that the government should work on a “reasonable” payment plan once there’s a clearer picture of its finances. García Padilla’s administration has yet to file audited statements for the fiscal year that ended June 30, 2014. The current administration has made little headway toward that goal over the past year, and the path to resolving the crisis may already be set by the time the next governor is sworn in. The U.S. House of Representatives may vote as soon as this week on a bill, called PROMESA, to create a federal control board that would oversee the commonwealth’s budgets and manage any debt restructurings. The bill was approved this week by the House Committee on Natural Resources. Rossello has spoken out against the federal legislation because it doesn’t provide a path to statehood and allows the control board to force a restructuring in court if needed.
Read the full report of the House Committee on Natural Resources on PROMESA, H.R. 5278.
