Puerto Rico Revises Fiscal Plan, Restructuring Proposal to Creditors
SAN JUAN – The Puerto Rico government’s fiscal team will hold Friday a conference call with creditors’ advisers in which a new fiscal & economic growth plan (FEGP) will be presented by the commonwealth, according to a statement released by the Government Development Bank (GDB).
The FEGP “is being revised given the recent reduction in revenue projections,” and will now extend for 10 years, instead of the original five-year period, according to the statement. “Today, a conference call with the creditors’ advisers will take place to discuss the revised plan, and we will make it public shortly,” GDB President & Chairwoman Melba Acosta stated.
The long-term fiscal and economic plan was released last September by the Economic Recovery Working Group and includes a host of reform measures and other initiatives mainly aimed at bringing back economic growth to the island. Moreover, the plan proposed a local fiscal oversight board, a measure that was later enacted into law, although its members have yet to be named by La Fortaleza.
Meanwhile, commonwealth advisers officially announced last November the government’s intent to put together a “superbond” deal, whereby Puerto Rico bondholders would be able to exchange their existing commonwealth debt into new, more secure paper. The idea underpinning the proposal is to restructure, in one fell swoop, a large chunk of the island’s $70 billion debt, while taking into consideration the particularities of each type of commonwealth debt.
But given the latest developments, “the restructuring proposal is being adjusted accordingly,” Acosta stated Friday.
After meetings between representatives of several creditor groups and commonwealth advisers took place late last year, talks had yet to resume. What’s more, some creditor groups allege the commonwealth government has cancelled scheduled meetings with representatives of certain creditor groups.
“We are committed to engaging in conversations with our creditors and their advisers about our current fiscal standing,” the GDB chief stated. “We continue our plan to develop a comprehensive set of solutions, including our thoughts regarding a restructuring proposal, wherein all parties make the necessary sacrifices that will support the long-term sustainability of the Commonwealth’s economy.”
The commonwealth has resumed its lobbying efforts on Capitol Hill, which mainly center on securing access to Chapter 9 of the U.S. Bankruptcy Code. This would allow Puerto Rico to restructure more than $20 billion of public corporation debt, and could potentially change the commonwealth’s game plan in negotiating with its creditors.
The García Padilla administration is banking on congressional action, particularly over Chapter 9 access, during the first quarter of the new year as it tries to avoid additional defaults amid a steeper debt-service schedule that begins in summertime.