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A plan to restructure $22 billion of Puerto Rico debt and fix the bankrupt island’s unfunded pension system won’t have the support of Governor Pedro Pierluisi, Bloomberg News reported. The governor intends to file an objection regarding the restructuring plan to the court overseeing Puerto Rico’s record bankruptcy, Pierluisi said in a statement yesterday. The governor’s plan to oppose the debt agreement follows his signature earlier this month on legislation that prohibits additional cuts to public pensions. Puerto Rico owes current and future retirees $55 billion and pays about $2 billion annually from its operating budget to cover pension checks. Still, Pierluisi says that he supports the debt restructuring, but public workers shouldn’t have to take on additional benefit cuts after a 2013 overhaul of the pension system.

Puerto Rico’s financial oversight board is aiming to get the commonwealth out of its record bankruptcy by the end of 2021, a move that is expected to help lift the island out of years of economic decline, Bloomberg News reported. The oversight board, which Congress created in 2016 to fix Puerto Rico’s financial crisis, filed a restructuring plan this month with the bankruptcy court to reduce $22 billion of debt. Judge Laura Taylor Swain is set to hear arguments on the restructuring at a July 13 hearing. “We hope that we are on track for Puerto Rico to emerge from bankruptcy, ideally before the end of the year,” David Skeel, the board’s chairman, said yesterday during a public meeting for the panel. Puerto Rico has been in bankruptcy, called Title III, for four years as it has suffered hurricanes, earthquakes, political turmoil and the coronavirus pandemic. Leaving bankruptcy will allow the commonwealth to borrow again in the capital markets and help improve economic growth on the island, Skeel said. “Getting out of bankruptcy will move Puerto Rico to where it’s having access to the capital markets,” he said. “It will make Puerto Rico attractive and an exciting place, I think, for development.” Puerto Rico’s Electric Power Authority is also in bankruptcy. The board anticipates filing with the court a restructuring plan in early 2022, Natalie Jaresko, the board’s executive director, said during the meeting.

A bond insurer can access a limited pool of information explaining Puerto Rico's cash position amid ongoing efforts to restructure the commonwealth’s debt stack, but it is not entitled to more information related to the territory's real estate assets right now, a judge ruled on Monday, Reuters reported. U.S. Magistrate Judge Judith Dein issued a pair of written decisions largely rejecting bond insurer Ambac Assurance Corp's call for more detailed explanations of Puerto Rico's cash that can be used to pay creditors and real estate properties that could be sold for the benefit of creditors. (Dein works in the Massachusetts federal court but is providing some oversight in the commonwealth's bankruptcy-like Title III proceedings.) Her rulings come as the federally appointed Financial Oversight and Management Board for Puerto Rico (FOMB), represented by Proskauer Rose, continues its efforts to build support for its proposed debt adjustment plan for the commonwealth, which would reduce $35 billion in public debt to $7.4 billion and restructure more than $50 billion in pension liabilities. Though the board has lined up support from two other major bond insurers, Ambac has not yet signed on to the proposal. Ambac, represented by Milbank, in November requested information surrounding three analyses that break down which of the commonwealth’s cash accounts are restricted — meaning unavailable to pay off creditors — and which are unrestricted. Puerto Rico has about $11.4 billion in unrestricted cash sitting in various accounts, according to court papers filed last week. In one of her two rulings on Monday, Dein held that Ambac did not prove that it needs access to so-called process documents showing the evolution of the analyses. Additionally, Dein said, the board already provided information it used to identify accounts as restricted or unrestricted and additional details Ambac seeks is likely protected by attorney-client privilege. The burden of forcing the oversight board to collect additional documents from its various advisors would outweigh any benefit Ambac would receive, she added. However, Dein granted Ambac's request to access certain materials used to calculate the analyses. The status of the cash accounts, she added, are “clearly” relevant to the proposed plan of debt adjustment.

Puerto Rico’s financial oversight board is asking a court to conduct hearings on its debt restructuring plan in October, a step that could allow the island to resolve its record bankruptcy this year, Bloomberg News reported. The oversight board is seeking a confirmation hearing on its debt-restructuring deal on or about Oct. 18 and anticipates the procedure could last about two weeks, according to a court filing. The board expects to file an updated debt plan that will also address its pension liabilities to the court by Tuesday. “In order to meet the milestones in the plan support agreement and related agreements and to permit the court to consider the issues which shall be presented, the oversight board shall request a confirmation hearing to begin on or about October 18, 2021 with an anticipated duration of approximately two weeks if conducted on a non-consensual basis,” according to the court filing. Puerto Rico is seeking to reduce $18.8 billion of general obligations and Public Buildings Authority debt. Investors would receive $14.4 billion — $7 billion in cash and the rest through the issuance of new securities. Bondholders would also get a so-called contingent-value instrument that would pay off if sales-tax receipts surpass estimates. In May 2017, the board filed on behalf of the commonwealth for the largest-ever bankruptcy by a government entity in the U.S. Exiting that legal fight could help the island rebuild its stagnant economy, create jobs and reverse or stall its population decline. Puerto Rico faced hurricanes, earthquakes and political strife even before the pandemic. The deal is supported by bond insurers Assured Guaranty Ltd. and MBIA Inc.’s National Public Finance Guarantee Corp. and competing bondholders, including Aurelius Capital Management, BlackRock Financial Management Inc. and Davidson Kempner Capital Management.

Puerto Rico central government bondholders are opposing part of an Oversight Board motion to restart suits on Puerto Rico revenue bonds, Bond Buyer reported. Bondholder parties to the central government Plan Support Agreement (PSA) filed a “limited objection” to the board’s motion Wednesday afternoon in the Title III bankruptcy, asking the court to maintain the litigation stay on the issue of creditor priorities. The bondholder parties are investment funds holding general obligation and Public Building Authority bonds. On April 6 the board filed a motion to lift the stays in three similar adversary proceedings against holders of revenue bonds of the Highways and Transportation Authority, Puerto Rico Infrastructure and Finance Authority, and Convention Center District Authority. Attorneys for the central government bondholders told the court, “to the extent that the Oversight Board seeks to disallow proofs of claims asserted against the commonwealth because [revenue bondholder] defendants have no such claims, the PSA Creditors do not object to the Lift Stay Motion. Similarly, the PSA Creditors do not oppose the Lift Stay Motion to the extent the Oversight Board seeks to litigate issues that are not addressed in the Amended Commonwealth Plan [of Adjustment]. “The PSA Creditors do object, however, to any effort by the Oversight Board to litigate issues that are proposed to be compromised and settled under the Amended Commonwealth Plan, including the impact of [the Puerto Rico Oversight, Management, and Economic Stability Act] on relative creditor priorities governed by applicable Puerto Rico law,” the attorneys wrote. The attorneys, including Willkie Farr & Gallagher Partner Mark Stancil, represent the Lawful Constitutional Debt Coalition, the Ad Hoc Group of Constitutional Debtholders, Ad Hoc Group of Constitutional Debtholders, and the QTCB Noteholder Group. Stancil represents the Ad Hoc Group of Constitutional Debtholders. In early March the board presented a proposed plan of adjustment for the central government debt to the court. According to PSA Creditors, “the amended commonwealth plan [of adjustment] continues to incorporate a proposed global compromise and settlement concerning the allowance, treatment, and priority status of constitutional debt, including by allowing the commonwealth to use the relevant revenues to pay the claims of holders of constitutional debt.” (Subscription required.)

Puerto Rico, the U.S. territory still in the midst of a four-year-long bankruptcy, is seizing on demand for risky bonds, Bloomberg News reported. The Puerto Rico Aqueduct and Sewer Authority, the island’s main water supplier, is planning to refinance as much as $1.8 billion of debt after the yield penalty it faces in the bond market tumbled. It would be the biggest high-yield municipal debt deal since Ohio’s sale of more than $3 billion tobacco-settlement bonds in February 2020, according to data compiled by Bloomberg. The growing confidence among investors that the Federal Reserve is poised to keep interest rates low as the U.S. economy rebounds has fueled demand for high-yield securities across the world’s bond markets. The riskiest municipal securities are no exception, with junk-bond yields sliding from 3.72% in mid-March to 3.55%, not far from the lows seen before the pandemic shutdowns began in the U.S., according to a Bloomberg Barclays index. High-yield municipal-debt funds picked up $821 million of cash from investors during the week ended Wednesday, the third largest on record, according to Refinitiv Lipper US Fund Flows data. Puerto Rico has yet to determine the exact size of the refunding deal and when the bonds may price, Ivan Caraballo, a spokesperson for the commonwealth’s Fiscal Agency and Financial Advisory Authority, said in an email. Prasa, as the utility is known, did a similar refinancing in December and the bonds have since rallied. Debt maturing in 2047 last traded on March 24 with an average yield of 3.03%, 130 basis points more than top-rated bonds, according to data compiled by Bloomberg. That yield spread is down from 276 basis points when the securities were first sold.

The Puerto Rico Oversight Board sought on Tuesday to restart suits on $6.4 billion of revenue bonds and to set the central government bankruptcy disclosure hearing for June 16, The Bond Buyer reported. The board also extended a deadline for the bond insurers to withdraw their support of the debt deal. The board’s attorneys, led by Proskauer Rose Partner Martin Bienenstock, filed a memorandum of law supporting its motion to remove the stay on the revenue bond adversary proceedings concerning Highways and Transportation Authority bonds, Puerto Rico Infrastructure and Finance Authority rum bonds, and Convention Center District Authority bonds. They also filed a joint motion to schedule the disclosure hearing, establish deadlines for filing objections to it, and establish a document depository for the disclosure hearing. There are three revenue bond adversary proceedings (similar to law suits) in the Puerto Rico bankruptcy, one for each of the HTA, PRIFA, and CCDA. The bondholders claim that Puerto Rico’s central government “is liable to [the bondholders, bond insurers and bond trustee] for (i) not appropriating and transferring certain taxes and fees levied and collected by the Commonwealth [of Puerto Rico], which historically were appropriated and transferred to CCDA and HTA, and (ii) not appropriating and transferring certain rum taxes covered into the commonwealth Treasury by the United States Treasury, which historically were appropriated and transferred to PRIFA,” according to the Oversight Board’s filing.

Two rival bills seeking to resolve Puerto Rico’s status as a U.S. territory will get full hearings in the U.S. House of Representatives’ Natural Resources Committee on April 14, Bloomberg News reported. In a statement on Monday, Committee Chairman Raul Grijalva (D-Ariz.) said that both bills would get a “fair hearing” and that he wouldn’t put his “thumb on the scale.” The Puerto Rico Statehood Admission Act seeks to turn Puerto Rico into the 51st U.S. state by holding a binding “yes” or “no” vote on the island. The Puerto Rico Self-Determination Act would convene a delegation to study all territorial options including independence, statehood and free association. Backers of the bills see them as mutually exclusive. Puerto Rico Governor Pedro Pierluisi, a Democrat who made statehood central to his campaign, has suggested the Self-Determination Act is a ploy to undermine Puerto Rico’s admission to the union. The Caribbean island of 3.2 million has been a U.S. possession since 1898. It’s currently crawling out of a historic bankruptcy aimed at reducing nearly $18 billion of debt.

A framework that outlines how Puerto Rico will restructure at least $35 billion in public debt and more than $50 billion in public pension liabilities threatens a 10% cut to public pensions if no agreement is reached with retirees, the Associated Press reported. The amended plan of adjustment of 233 pages was filed late Monday in U.S. court by a federal control board that oversees Puerto Rico’s finances and was created by Congress to lift the U.S. territory’s government out of bankruptcy. The plan includes a proposed cut of up to 8.5% to monthly pensions of at least $1,500. That has long been a point of contention between the board and the governor, who has repeatedly said he would not approve such cuts. Board Chairman David Skeel called the plan “a milestone for Puerto Rico’s recovery, stability, and prosperity. This plan substantially reduces the burden of debt payments on future generations, stabilizes and protects pensions that have been mismanaged for so long, and affirms the collective bargaining agreements of government workers.” Gov. Pedro Pierluisi issued a statement ahead of a press conference he would hold on the matter late Tuesday morning, saying the plan was a great step in helping end the debt-restructuring process. “Puerto Rico needs to leave this bankruptcy process behind in order to achieve the sustainable economic development to which we all aspire and eliminate the uncertainty inherent in this process, as well as the million-dollar restructuring expenses that the government has had to incur,” he said. But Pierluisi noted the government will state in court that it does not wholly support the plan. “My administration has been emphatic that this pension cut is not reasonable,” he said.