Puerto Rico’s fragile economy is facing an uncertain future after the island’s governor rejected a settlement announced late Sunday with bondholders that would reduce the U.S. territory’s public debt by 70 percent, the Associated Press reported. The settlement is the biggest one to date since the island’s government announced in 2015 that it was unable to pay its more than $70 billion public debt load and filed for the largest U.S. municipal bankruptcy in May 2017. It’s unclear whether the deal will become final, with Gov. Wanda Vázquez saying that it places too heavy a burden on the island’s retirees and noting that it still requires legislative approval. The deal also has to be approved by a federal judge overseeing a bankruptcy-like process for Puerto Rico. If the bondholders receive better treatment in the bankruptcy process, so should retirees,” she said. She said bondholders received new legal protections in amendments made to a September 2019 adjustment plan, but that retirees did not receive anything additional. It’s the latest clash between Vázquez and a federal control board overseeing Puerto Rico’s finances, which reached the deal with several groups of bondholders to reduce the island’s bond debt from some $35 billion to roughly $11 billion. Read more.
Previously, Reuters reported that Puerto Rico would have shed about $24 billion of debt and move closer to exiting bankruptcy under an agreement with bondholders announced yesterday by the U.S. commonwealth’s federally created financial oversight board. The deal aimed to cut $35 billion of bonds and claims to about $11 billion as it increases the ranks of general obligation (GO) and Public Buildings Authority (PBA) bondholders that signed onto a plan to restructure core government debt and more than $50 billion in pension obligations that the board filed in U.S. District Court in September. Read more.
