Puerto Rico has reached a deal with bondholders and insurers of debt issued by its bankrupt sales tax financing corporation, COFINA, the U.S. territory’s governor and federal oversight board said yesterday, Reuters reported. The agreement would reduce COFINA’s sales-tax-backed debt by more than 32 percent and result in about $17.5 billion in debt service savings, officials said in statements. The board, which was created under a federal act known as PROMESA, said that it expects the deal with senior and junior bondholders and monoline insurance companies that guarantee bond payments to lead to a consensual plan of adjustment for COFINA. Puerto Rico has been in bankruptcy court since May 2017 trying to restructure about $120 billion of debt and pension obligations. Read more.
In related news, Puerto Rico yesterday submitted a recovery plan to the U.S. Congress that carries an estimated price tag of $139 billion, which is 47 percent more than the bankrupt U.S. commonwealth requested in November, Reuters reported. The economic and disaster recovery plan allocates the money to housing, water and energy systems, education, transportation, public buildings, communications, planning, municipalities, as well as to the economy and environment, according to Governor Ricardo Rossello’s office. Last November, Rossello requested $94.4 billion from Congress to rebuild the island’s infrastructure, housing, schools and hospitals devastated by Hurricanes Maria and Irma. That so-called Build Back Better plan contained a preliminary assessment of damages and an initial estimate of money the island needs to rebuild, according to the statement. The final plan, which was submitted on the deadline day set in the 2018 U.S. budget act, expanded the scope of the November request and was developed with input from federal agencies, the governor’s office said. Read more.
Additionally, a U.S. judge ruled on Tuesday that Puerto Rico’s federal oversight board has the power to enforce fiscal discipline on the bankrupt island’s government through the budgetary process, but lacks authority to demand changes in law, Reuters reported. Governor Ricardo Rosselló and Puerto Rico’s legislature filed lawsuits in July claiming the board, which was created by the U.S. Congress under the PROMESA in 2016, overstepped its power by imposing a belt-tightening fiscal plan and budget on the government that require public policy actions. The board, which sought to dismiss the litigation, argued that if it cannot impose reforms through a fiscal plan over the objections of the governor, “then PROMESA created a toothless oversight board.” Judge Laura Taylor Swain ruled that PROMESA gives the board the power to make “binding policy choices” for the U.S. commonwealth despite the governor’s objection. Read more.
