Puerto Rico’s federal supervisors are making a final push to write down $18 billion in sales-tax bonds under a settlement that would mark their largest renegotiation yet of the U.S. territory’s crushing debts, the Wall Street Journal reported. The restructuring proposal covers the revenue bonds known as Cofina s, which make up roughly 40 percent of Puerto Rico’s core government debt. First issued in 2007, the Cofina bonds are backed by sales taxes that provided investors a secure source of repayment and lowered Puerto Rico’s borrowing costs. Sales-tax revenue has never fallen short of paying off the Cofina bonds. But a decade of economic contraction has pushed Puerto Rico’s authorities to seek concessions from those bondholders to avoid further cutbacks in public services. The settlement pending before U.S. District Judge Laura Taylor Swain would eliminate $6 billion in Cofina debt and release to Puerto Rico roughly half of the future sales-tax revenue currently earmarked for bondholders. Read more. (Subscription required.)
In related news, Puerto Rico took an important step toward privatizing its bankrupt public power monopoly and bringing in new investment to help modernize the utility and reverse the island’s economic decline, the Wall Street Journal reported. The government announced on Thursday the selection of four bidders seeking to take over Puerto Rico Electric Power Authority’s transmission and distribution system: Duke Energy Corp., Exelon Corp., PSEG Services Corp. and a consortium of ATCO Ltd., IEM Inc. and Quanta Services Inc. “Under a public-private partnership, we will be developing a system that responds to the real needs of our people, providing stability, reliability and efficiency to our island’s energy system,” said Omar Marrero, executive director of the Puerto Rico Public-Private Partnerships Authority. The government will now solicit proposals from the companies and expects to name a winner in the third quarter of this year. Read more. (Subscription required.)
