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Puerto Rico GO bondholders issue proposal for restructuring

Published 2016-04-05, 07:13 p/m
© Reuters.  Puerto Rico GO bondholders issue proposal for restructuring

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 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.
"This exchange would save the Commonwealth $1.9 billion in
debt service payments over the next five years," according to
the document.
These bondholders earlier criticized legislation 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 May 1.
The Senate approved the controversial legislation in the wee
hours of Tuesday morning while the House continues its debate.
It is expected to vote before the day is done.
"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.
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.
"The combination of principal deferment plus $750 million in
new funds will help to avoid a July 1 default," the creditors
said.
Puerto Rico bondholders critical of government debt moratorium
bill
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