Here’s What You Need to Know on Puerto Rico’s Restructuring Deal
Here’s What You Need to Know on Puerto Rico’s Restructuring Deal
(Bloomberg) -- Puerto Rico’s financial oversight board and investors holding $8 billion of general obligations and commonwealth-guaranteed debt reached a tentative deal on Sunday that would slash those securities by 40%, a key step in the island’s record bankruptcy.
The potential restructuring plan brings together competing bondholder groups that had been divided in the past year over whether debt Puerto Rico sold in 2012 and 2014 is invalid. Aurelius Capital Management and Autonomy Capital, which hold securities sold in those years, joined the tentative agreement, which other bondholders signed in June. The island’s bonds climbed on the news.
Restructuring the securities requires approval from U.S. District Court Judge Laura Taylor Swain, who is overseeing the island’s bankruptcy, and Puerto Rico lawmakers. Governor Wanda Vazquez rejected the agreement in its current form, saying it doesn’t ease pension cuts for public workers.
Here are the details of the debt agreement:
- Investors will receive $10.7 billion of new bonds and also $3.8 billion in cash in exchange for Puerto Rico’s $17.8 billion of outstanding general obligations and commonwealth-guaranteed debt
- Bondholders receive a mix of new bonds: 50% general obligations and 50% sales-tax bonds with a junior lien
- Investors will receive through new bonds and the cash payment:
- 2014 G.O.: 65.4 cents on the dollar, up from an earlier offer of 35 cents
- 2012 G.O.: 69.9 cents, up from an earlier offer of 45 cents
- Vintage G.O.: 70.4 cents to 74.9 cents, depending on series
- 2012 Public Buildings Authority: 72.2 cents
- 2011 PBA: 76.8 cents
- Pre-2011 PBA: 77.6 cents
- New bonds will mature over 20 years rather than over 30 years in prior agreement
- Oversight board ends its legal challenge to cancel $6 billion of debt sold in 2012 and 2014
- Previously, the board had argued the sales may have breached the island’s constitutional debt limits
- Reduces annual debt service costs to $1.5 billion on the new restructured bonds and outstanding sales-tax debt, down from $4.2 billion the commonwealth paid in 2017
To contact the reporter on this story: Michelle Kaske in New York at mkaske@bloomberg.net
To contact the editors responsible for this story: Elizabeth Campbell at ecampbell14@bloomberg.net, Christopher Maloney
©2020 Bloomberg L.P.