Puerto Rico Board Seeks Island’s Bankruptcy Exit This Year
(Bloomberg) -- Puerto Rico’s financial oversight board is aiming to get the commonwealth out of its record bankruptcy by the end of 2021, a move that is expected to help lift the island out of years of economic decline.
The oversight board, which Congress created in 2016 to fix Puerto Rico’s financial crisis, filed a restructuring plan this month to the bankruptcy court to reduce $22 billion of debt. Judge Laura Taylor Swain is set to hear arguments on the restructuring at a July 13 hearing.
“We hope that we are on track for Puerto Rico to emerge from bankruptcy, ideally before the end of the year,” David Skeel, the board’s chairman, said Thursday during a public meeting for the panel.
Puerto Rico has been in bankruptcy, called Title III, for four years as it has suffered hurricanes, earthquakes, political turmoil and the coronavirus pandemic. Leaving bankruptcy will allow the commonwealth to borrow again in the capital markets and help improve economic growth on the island, Skeel said.
“Getting out of bankruptcy will move Puerto Rico to where it’s having access to the capital markets,” he said. “It will make Puerto Rico attractive and an exciting place, I think, for development.”
Puerto Rico’s Electric Power Authority is also in bankruptcy. The board anticipates filing to the court a restructuring plan in early 2022, Natalie Jaresko, the board’s executive director, said during the meeting.
Prepa, as the power utility is known, is seeking to reduce $9 billion of debt. If Prepa had to pay that full amount of debt, it would cost customers 5 cents to 6 cents per kilowatt hour, according to the utility’s multi-year fiscal plan. Not restructuring debt and implementing changes to the utility’s pension would result in electricity rates of 25.4 cents to 29.6 cents per kilowatt hour.
The board Thursday approved Prepa’s fiscal plan as well as those for several Puerto Rico entities, including the University of Puerto Rico and the Aqueduct and Sewer Authority. The spending frameworks help to balance budgets and implement expense reductions.
“Collectively, these fiscal plans provide an ambitious set of reforms that complement the commonwealth fiscal plan and will continue to put Puerto Rico toward long-term economic growth and opportunity,” Jaresko said during the meeting.
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