Puerto Rico GO creditors urge gov’t to resume interest payments
SAN JUAN — Amid Puerto Rico’s most recent cash flow numbers, a group of general obligation (GO) creditors is urging the island’s financial control board to resume debt-service payments and disclose al data that support the government’s certified fiscal plan.
According to a letter sent Monday to board members and counsel, the Ad Hoc Group of GO Bondholders—whose members, mostly hedge funds, own about $2.9 billion of the island’s constitutionally backed debt—expects an answer from the seven-member fiscal panel by Aug. 21.
The group states in the missive that the island’s “dramatic overperformance and rapidly expanding cash position” run counter to projections made by the board and “put to rest” claims that the commonwealth can’t pay its constitutionally protected debt.
Puerto Rico’s fiscal board approves implementation of furlough program
“Despite mounting evidence that the commonwealth’s finances are robust, the board has refused to correct the financial projections in its fiscal plan for the commonwealth,” reads the group’s letter, which adds that the government is using the extra cash to “increase nondebt general fund expenditures.”
The GO ad hoc group is calling on the board and the government to resume interest payments on GO debt, while urging the board to disclose data and projections that support the commonwealth’s certified fiscal plan and “which are irreconcilable” with recent disclosures made by the administration of Gov. Ricardo Rosselló.
The letter makes reference to the government’s recent statement on the island’s cash position as of June 30, which stood at $1.79 billion, or roughly $1.5 billion more than initially projected. In fighting the board’s request to implement a two-day furlough program for government employees beginning Sept. 1, the administration assured there was enough cash flow to avert activating the fiscal measure.
For its part, the board has argued that liquidity at a specific time is “irrelevant” and the $1.79 billion figure could be misleading, as it doesn’t account for accounts payable and all of the commonwealth’s liquidity.
The GO creditor group called these arguments “wrong” and “not credible,” adding that Promesa says interest payments on debt should be made by the commonwealth to the extent the board says it is feasible.
“The commonwealth did not build this cash position by skimping on expenses,” adds the GO ad hoc group in its letter. It further says the government has failed to separate essential services from nonessential ones, while also driving down accounts payable by $1.2 billion, representing “a $2.7 billion net improvement” in Puerto Rico’s finances during fiscal year 2017, which ended June 30.
“How has the commonwealth managed to achieve this $2.7 billion improvement? While the board claims to be unsure, the answer is clear: by refusing to pay constitutional debtholders while continuing to collect record tax revenues,” stresses the group, which adds that Puerto Rico has already accrued about $90 million in interest from missed payments.
The GO ad hoc group, moreover, calls on the board to make public all data used to come up with the fiscal plan’s projections. Allowing creditors to “critically examine” these projections in a bid to make them “more realistic” is in the best interest of all involved.
“This cannot happen if the board continues to hide the data,” the creditor group says in its letter.
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