(Adds statement from Puerto Rico official in paragraphs 6 and
7)
SAN JUAN, April 5 (Reuters) - Bondholders with nearly a
third of Puerto Rico's $17 billion outstanding General
Obligation bonds on Tuesday unveiled a proposal for a debt
restructuring they claim would help the island avoid outright
default.
Burdened by an overall $70 billion debt load that the
government says it cannot pay and a 45 percent poverty rate that
has led to a steady exodus of its American citizens back to the
mainland, Puerto Rico faces economic collapse without a solution
that either changes laws and/or involves an agreement with
creditors.
The bondholders, representing $5 billion of GO debt say they
would defer principal repayments on their bonds through June
2020. The proposal was issued by an ad hoc group of GO
bondholders, including mutual funds and others, represented by
the law firm Paul Weiss Rifkind Wharton & Garrison.
In addition, the creditors said they would buy approximately
$750 million in new debt at a 7 percent annual coupon and no
principal repayments until 2020.
"This exchange would save the Commonwealth $1.9 billion in
debt service payments over the next five years," according to
the document.
Puerto Rico's government said the proposal failed "to solve
the severe and real challenges" facing Puerto Rico.
"Incurring additional debt at a higher cost is not the
answer to the Commonwealth's fiscal issues," Melba Acosta,
president of Puerto Rico's Government Development Bank, said in
a statement. "Indeed it is exactly the type of 'Wall Street'
solution that led us to the precipice we are now looking over."
The same bondholders earlier criticized legislation
currently being rushed through Puerto Rico's Senate and House on
Tuesday that would halt bond payments ahead of a $422 million
debt bill owed by the Government Development Bank due on May 1.
The Senate approved the controversial legislation early on
Tuesday morning while the House continued its debate. It is
expected to vote before the end of the day.
"While we would like to negotiate with the Puerto Rican
Government in private and in good faith, the debt moratorium it
has proposed that is before the Puerto Rican legislature has
prompted this public release," Andrew Rosenberg, a lawyer with
Paul, Weiss said in a statement accompanying the proposal.
GO debt is backed by the full faith and credit of the
government and is typically the senior debt paid before all
others.
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Puerto Rico bondholders critical of government debt moratorium
bill
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