Puerto Rico’s governor announced yesterday that a federal control board reached a key deal that would reduce the U.S. territory’s overall debt by nearly 80%, but that his administration is rejecting it amid concerns about cuts to the island’s crumbling public pension system, the Associated Press reported. The impasse between the governor and a board that oversees Puerto Rico’s finances threatens to throw into limbo attempts to end a bankruptcy-like process for a government that six years ago declared unpayable its more than $70 billion public debt load. The deal was reached with creditors who hold general obligation bonds and Public Building Authority bonds sold by Puerto Rico’s government and would resolve $35 billion worth of debt and non-debt claims, according to the board. It also would reduce debt held by those creditors from $18.8 billion to $7.4 billion, a 61% reduction, and would provide them with $7.4 billion in bonds and $7 billion in cash, among other things. The board said the deal would free up more than $300 million a year for government services, and that instead of the 30 cents for every dollar in taxes and fees that Puerto Rico’s government collects that once went to creditors, it would be less than 8 cents. “It will set Puerto Rico on the path to end bankruptcy,” said board chairman David Skeel. “We think this is a very, very big moment in Puerto Rico’s recovery.” Gov. Pedro Pierluisi disagreed. He said in a statement that while the agreement is positive in many ways for Puerto Rico, his administration does not back the deal that is scheduled to be submitted in court next month and requires final approval from a federal judge overseeing the bankruptcy-like process. “The plan of adjustment should not be structured in a way that affects our pensioners even more,” he said.
