Puerto Rico’s governor projected his bankrupt, hurricane-ravaged U.S. territory will carry budget gaps for the next four fiscal years, leaving nothing to pay back the island’s $72 billion in bond debt until fiscal year 2022, according to Reuters. Governor Ricardo Rosselló made the projections in a revised fiscal turnaround plan released yesterday. The plan assumes a minimum of $35.3 billion in federal aid to help the island recover from Hurricane Maria, which devastated Puerto Rico in September, through the U.S. Federal Emergency Management Agency’s (FEMA) public assistance program. A previous turnaround plan, approved by Puerto Rico’s federally appointed financial oversight board last April, had projected $800 million a year for debt repayment, roughly a quarter of what it needs annually. That was before Maria slammed Puerto Rico, killing dozens, cutting power to all 3.4 million residents, and damaging and destroying tens of billions of dollars in housing. The new plan projects that Maria will spur increased inflation and nearly triple a contraction in gross national product this fiscal year, as well as drive some 600,000 more people from the island in the next five years. Read more.
In related news, the Puerto Rican governor’s plan to privatize PREPA, the island’s bankrupt power utility, could herald hard times for holders of its $9 billion in bonds, who are concerned the deal could strip their ability to collect on their investments, Reuters reported. Governor Ricardo Rosselló on Monday unveiled an 18-month plan to sell pieces of PREPA to potential private buyers, including renewable energy producers. The plan will need buy-in from the federally appointed board managing Puerto Rico’s finances, which has voiced support for privatization in the past, as well as approval by the court overseeing Puerto Rico’s bankruptcy. PREPA’s investors, many of them hedge funds and mutual funds, have long called for wresting the utility from government control, but a piecemeal privatization push run by the government is not what they had in mind. Read more.
