Puerto Rico’s unsecured creditors will drop their opposition to a deal to restructure roughly $4 billion of debt issued by the U.S. commonwealth’s defunct Government Development Bank (GDB), under an agreement revealed on Friday, Reuters reported. During a U.S. District Court hearing, lawyers for the government, the unsecured creditor committee (UCC) and Puerto Rico’s federally appointed financial oversight board announced the agreement. This advances the island’s first consensual debt restructuring under the federal Puerto Rico Oversight, Management and Economic Stability (PROMESA) Act. “We think that Title III debtors and creditors are better off,” said Luc Despins, a lawyer from Paul Hastings who represents the creditor committee. The proposed GDB restructuring deal is being pushed through Title VI of the federal law, which provides for a consensual restructuring framework between the government and creditors. The plan, overwhelmingly approved by creditors last month, would transfer to a GDB Debt Recovery Authority the bank’s municipal loan portfolios, real estate assets and unencumbered cash. The authority would issue new bonds backed by a statutory lien on those assets in an amount equal to 55 percent of outstanding debt. The deal calls for establishment of a Public Entity Trust, which would mostly receive non-performing loans made by the GDB to other government entities.
