The Puerto Rico control board has unveiled the framework of a major debt restructuring deal which could finally help Puerto Rico get out of bankruptcy and resume normal operations:
Puerto Rico’s financial supervisors struck a deal with creditors owed $3 billion that sets out a path for restructuring $35 billion in debt obligations tied to the central government and scaling back debt payments over the next 30 years by half.
The U.S. territory’s oversight board said the agreement marks an acknowledgment by bondholders “that Puerto Rico’s difficult financial situation requires a meaningful reduction in its debt burden to a sustainable level.”
The proposed settlement, announced Sunday, covers $18 billion in bonds that were guaranteed with Puerto Rico’s full faith and credit, including the largest junk-rated sale of municipal debt ever, a $3.5 billion issuance in 2014.
Unfortunately, like everything else involving Puerto Rico, this is stlll going to be a long and painful process as the government doesn’t support the deal, which means it will probably sue:
Gov. Ricardo Rosselló’s top finance adviser, Christian Sobrino, said the government doesn’t support the proposal because it is premised on a fiscal plan that cuts pension benefits.
Another problem is that the legal status of the control board remains in question and it is still an uncomfortable possibility that all the work the board has tried to do since being appointed may be wiped out by US courts.