For Immediate Release
Puerto Rico Proposes Debt Plan
WASHINGTON - Puerto Rico's Government Development Bank is meeting with investors in New York to share new details around a bond exchange first proposed by the indebted island last year. The proposal is not being made public but sources say it will include a "superbond" that investors could purchase in exchange for existing debt. The plan takes into account that the US Territory's budget gap is $2 billion larger than expected. Puerto Rico owes $72 billion in total debt.
"Without bankruptcy protection, the only relief available to Puerto Rico now is through direct negotiations," stated Eric LeCompte, Executive Director of the religious development group Jubilee USA. "The debt needs to be sustainable and we can't support any solutions at the expense of pensions or social services."
The superbond proposal would allow investors to voluntarily exchange existing debt for one of two new types of securities. One type would eventually have a 5% interest rate after a 2-year moratorium on interest payments while the other would be pegged to Puerto Rico's economic health and would not pay out at all until 2026. The deal would not impact some of Puerto Rico's debt, including debt from the island's public utility which is involved in its own debt negotiations.
Congress is currently debating legislation that would grant Puerto Rico's municipalities access to Chapter 9 bankruptcy protection. The House Committee on Natural Resources will hold its second hearing on Puerto Rico on February 2 to discuss elements of those bills. Forty-six US Senators sent a letter to Senate Majority Leader Mitch McConnell calling for legislation that helps Puerto Rico restructure its debt. House Speaker Paul Ryan promises action by March 31.
"We are seeing some momentum around Puerto Rico bankruptcy proposals in Congress," noted LeCompte, who serves on United Nations debt expert groups. "Every day the situation gets worse on the island and economic growth is only possible after we find a comprehensive solution to the debt crisis."
Read a timeline of Puerto Rico's debt crisis
Read more about the service cuts resulting from Puerto Rico's debt crisis
Read more about legislation granting Puerto Rico Chapter 9 bankruptcy protection
Read the letter from 46 US Senators to Majority Leader McConnell