Puerto Rico Government commences debt restructuring under Title III
SAN JUAN – Gov. Ricardo Rosselló announced that, on Tuesday evening, he asked the fiscal control board for protection under Promesa’s Title III. The board then presented Wednesday morning the legal proceeding in the U.S. District Court for Puerto Rico, marking the beginning of the largest debt restructuring process in the history of the municipal bond market.
In the filing—which only covers the central government—the board assures that it complies with all the requirements set forth in Promesa’s Title III, including prior negotiations in good faith, efforts to publish audited financial statements and the availability of a certified fiscal plan.
In a written statement, the board says it was “necessary and appropriate for the central government to file a voluntary petition under Title III of Promesa to protect the residents of Puerto Rico, as well as the interests of its creditors.”
During a press conference at La Fortaleza, Rosselló said that “unfortunately some of the creditors have objected the fiscal plan and will continue to object with only one objective: to be able to increase the money available to them and therefore reduce that available to the people of Puerto Rico.” He vowed to protect government operations, services and “the best interest” of the people of Puerto Rico.
Both the governor and the board acknowledged that the end of Promesa’s stay on litigation prompted the decision to file a Title III case for the commonwealth. The latter also features a stay similar to the one the government had since the enactment of Promesa last summer and which expired May 1.
“A claim to take all of Treasury’s money to pay a credit is unacceptable,” Rosselló said in reference to a lawsuit filed Tuesday asking for the immediate payment of nearly $245 million in debt service the government hasn’t made.
Meanwhile, La Fortaleza said there will be individual entities that will also begin the Title III process. However, the governor told Caribbean Business that these would be revealed “later on.” The Government Development Bank, and Puerto Rico’s Highways & Transportation, Aqueduct & Sewer and Electric Power authorities, are all covered entities with certified fiscal plans.
Both Rosselló and his representative to the board, Elías Sánchez, said the government always negotiated in good faith with the creditors. “The best example,” Sánchez said, “was that the governor continued the negotiation with groups” even after the stay ended.
“[The] bad faith came from the other side. The government showed good faith at all times,” Sánchez said.
Nevertheless, both the governor and the board assured that the doors remain open for negotiations with creditors, regardless of the Title III filing. “The Oversight Board continues to believe that consensual negotiations are preferable to the extent possible and will pursue them with all creditor groups willing to do so. These filings do not bring an end to those discussions,” stated Carrión.
When asked about the role to be played by the board under Title III as representative of the government, Rosselló replied he still maintains control over the government’s fiscal plan and public policy.