Puerto Rico releases offer to bondholders

AP News
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Posted: Apr 29, 2017 2:07 PM

SAN JUAN, Puerto Rico (AP) — The Puerto Rico government is offering to pay its senior creditors around 50 cents on the dollar as part of efforts to address its economic crisis.

The government released at midnight Friday its offer to holders of constitutionally backed general obligation and sales-tax bonds. It provides $16.75 billion to cover a $36.38 billion debt, though bondholders could receive an additional $8 billion if the government receives more money than forecast over the next decade.

Other, junior bondholders would get paid only if Puerto Rico outperforms its cash flow estimates, according to the plan.

"The commonwealth's proposal is not a credible starting point for negotiations," said Andrew Rosenberg, an adviser to general obligation bondholders, in a written statement Saturday. He said the offer is based on a fiscal plan that has "many errors and unexplained numbers."

The commonwealth loses protection from creditor lawsuits at midnight Monday, but the federal oversight board overseeing Puerto Rico's efforts to straighten out its finances is considering a bankruptcy-like path to restructuring debt that would also give some protection from lawsuits.

The Puerto Rico official heading up its restructuring effort said the proposal is intended to "maximize returns to its creditors in a manner consistent with Puerto Rico's goals for economic growth."

Fiscal Agency and Financial Advisory Authority Executive Director Gerardo Portela said officials are "committed in their good faith efforts to reach a consensual resolution with the government's creditors" and expect talks to continue over several weeks.

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Puerto Rico plans to hike water rates, privatize government operations and close a bank that once oversaw the island's debt transactions as part of efforts to confront its debt and economic challenges. The measures were outlined in new fiscal plans presented Friday to the federal control board.

Gov. Ricardo Rossello also said he would enact legislation this weekend that would cut public employee benefits, hike cigarette taxes and empower the government to access funds set aside for certain bonds and surpluses from public corporations when necessary.