Thursday, December 8, 2022

La Fortaleza Seeks to Retake Debt Talks With Creditors

By on June 22, 2016

SAN JUAN — Gov. Alejandro García Padilla lamented not having struck an agreement yet with Puerto Rico’s creditors and said late Tuesday that his administration intends to retake debt-restructuring talks with its creditors, whether publicly or not, “as long as there is a real opportunity to obtain the relief we need.”

iStock_000079315145_Full(congress)He also urged the U.S. Senate to promptly consider the Puerto Rico Oversight, Management & Economic Stability Act’s (Promesa), as it would facilitate negotiations between Puerto Rico and its creditors. On Wednesday, the governor met with U.S. Treasury officials in Washington, D.C., to discuss efforts to secure Promesa’s passage in the upper chamber.

The island’s fiscal authorities announced Tuesday that advisers for the commonwealth and certain creditor groups had ended private discussions over a deal to restructure a large chunk of the island’s public debt. Later on Tuesday, a group of general obligation (GO) bondholders sued the government in New York, challenging the island’s debt-moratorium law.

Groups representing Sales Tax Financing Corp. (Cofina by its Spanish acronym) and GO holders had entered into nondisclosure agreements to discuss the administration’s latest debt-restructuring offer, which was presented June 14. After going back and forth over several counteroffers made by the creditor groups, sides failed to reach an agreement and decided to suspend negotiations.

Andrew Rosenberg, a spokesperson for the GO group, stated Tuesday that their counterproposal “shows a clear and continued willingness” to negotiate with the Puerto Rico government, “and avoid an unnecessary July 1 default on general obligation debt.”

The camp of Cofina senior holders prefers to continue negotiations, and says their counterproposal reflects their willingness to receive haircuts, or reducing principal, as well as to accept other concessions asked by commonwealth advisers.

While thanking the groups for their disposition in sitting at the negotiating table, García Padilla said their counterproposals fall short of presenting a lasting solution. He noted these offered limited liquidity relief in the short term, but failed to attain sustainable debt-service levels in the long run for Puerto Rico.

“These counteroffers simply take today’s economic problems and postpone them for our sons’ generation to solve,” he said.

For the past nine months, talks with creditors have been held in an effort to reduce the island’s debt to sustainable levels and share the burden among all stakeholders, the governor adds in his statement.

“I hope our creditors understand it is their turn to contribute and be willing to make their own sacrifices,” stressed García Padilla, while noting how the government and citizens have put in their fair share.

For the governor, although they fail to provide a viable solution, some of the creditors’ counterproposals implicitly acknowledge Puerto Rico’s need to reduce its debt and the urge for Congress to provide restructuring tools to the island.

The House approved Promesa earlier this month, and the upper chamber is expected to vote on the measure before the end of July 1. Some members of the upper chamber’s Democratic delegation have already called for amendments to the bill.

“It is sad that some creditors continue to lose time, money and energy trying to oppose efforts being undertaken in Congress,” García Padilla said.

As it continues its push for federal legislation, the administration seeks a broad debt-restructuring deal that would target $50 billion worth of Puerto Rico’s debt. More than $1.5 billion in debt-service payments hit on July 1, and officials continue to warn there is not enough cash to meet the debt obligations in full while ensuring essential services to citizens.

You must be logged in to post a comment Login