Puerto Rico Seeks Fall Hearings to Resolve Bankruptcy

Puerto Rico’s financial oversight board is asking a court to conduct hearings on its debt restructuring plan in October, a step that could allow the island to resolve its record bankruptcy this year.

The oversight board is seeking a conformation hearing on its debt-restructuring deal on or about Oct. 18 and anticipates the procedure could last about two weeks, according to a court filing. The board expects to file an updated debt plan that will also address its pension liabilities to the court by Tuesday.

“In order to meet the milestones in the plan support agreement and related agreements and to permit the court to consider the issues which shall be presented, the oversight board shall request a confirmation hearing to begin on or about October 18, 2021 with an anticipated duration of approximately two weeks if conducted on a non-consensual basis,” according to the court filing.

Puerto Rico is seeking to reduce $18.8 billion of general obligations and Public Buildings Authority debt. Investors would receive $14.4 billion -- $7 billion in cash and the rest through the issuance of new securities. Bondholders would also get a so-called contingent-value instrument that would pay off if sales-tax receipts surpass estimates.

In May 2017, the board filed on behalf of the commonwealth for the largest-ever bankruptcy by a government entity in the U.S. Exiting that legal fight could help the island rebuild its stagnant economy, create jobs and reverse or stall its population decline. Puerto Rico faced hurricanes, earthquakes and political strife even before the pandemic.

The deal is supported by bond insurers Assured Guaranty Ltd. and MBIA Inc.’s National Public Finance Guarantee Corp. and competing bondholders, including Aurelius Capital Management, BlackRock Financial Management Inc. and Davidson Kempner Capital Management.

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