Post by Logan on Feb 1, 2016 2:24:27 GMT -6
Puerto Rico has proposed a plan to ease its crushing debt burden that would give major creditors new bonds worth an average of 54 percent of their existing ones, but also would give bondholders an unusual way to receive additional money if the commonwealth’s economy grows at unexpectedly rapid rates.
The proposal was made Friday at a meeting between advisers to the Puerto Rican governor and advisers to creditors that hold $49 billion of the island’s more than $72 billion worth of debt, according to a person briefed on the proposal. The proposal comes as Congress and the Obama administration are wrestling over what legislation could help Puerto Rico restructure its debt, force recalcitrant creditors to sign onto a plan, and ensure that the island maintains fiscal discipline so that it does not end up in a similar fix in the future.
The plan presented Friday, and which the creditors are weighing, would cut Puerto Rico’s debt service from 36 percent of the commonwealth’s budget to 15 percent, a level equal to that of Hawaii, which has the highest rate of any U.S. state. Creditors must now choose whether to accept the deal, negotiate, or pursue lengthy litigation while waiting for possible congressional action.
Under the proposal, Puerto Rico would issue $26.5 billion worth of new “base bonds” to replace $49 billion in existing bonds issued by 17 government entities. Investors holding the highest quality bonds would be able to exchange their existing bonds for new ones at a more favorable rate.
Read more: www.washingtonpost.com/world/puerto-rico-offers-plan-to-restructure-its-debt/2016/01/31/f0042e6e-c87d-11e5-a7b2-5a2f824b02c9_story.html
The proposal was made Friday at a meeting between advisers to the Puerto Rican governor and advisers to creditors that hold $49 billion of the island’s more than $72 billion worth of debt, according to a person briefed on the proposal. The proposal comes as Congress and the Obama administration are wrestling over what legislation could help Puerto Rico restructure its debt, force recalcitrant creditors to sign onto a plan, and ensure that the island maintains fiscal discipline so that it does not end up in a similar fix in the future.
The plan presented Friday, and which the creditors are weighing, would cut Puerto Rico’s debt service from 36 percent of the commonwealth’s budget to 15 percent, a level equal to that of Hawaii, which has the highest rate of any U.S. state. Creditors must now choose whether to accept the deal, negotiate, or pursue lengthy litigation while waiting for possible congressional action.
Under the proposal, Puerto Rico would issue $26.5 billion worth of new “base bonds” to replace $49 billion in existing bonds issued by 17 government entities. Investors holding the highest quality bonds would be able to exchange their existing bonds for new ones at a more favorable rate.
Read more: www.washingtonpost.com/world/puerto-rico-offers-plan-to-restructure-its-debt/2016/01/31/f0042e6e-c87d-11e5-a7b2-5a2f824b02c9_story.html