Puerto Rico GO bondholders issue proposal for restructuring (updated)

Avante

06/04/2016 02:37

(Adds statement from Puerto Rico official in paragraphs 6 and 
7) 
    SAN JUAN, April 5 (Reuters) - Bondholders with nearly a 
third of Puerto Rico's $17 billion outstanding General 
Obligation bonds on Tuesday unveiled a proposal for a debt 
restructuring they claim would help the island avoid outright 
default. 
    Burdened by an overall $70 billion debt load that the 
government says it cannot pay and a 45 percent poverty rate that 
has led to a steady exodus of its American citizens back to the 
mainland, Puerto Rico faces economic collapse without a solution 
that either changes laws and/or involves an agreement with 
creditors. 
    The bondholders, representing $5 billion of GO debt say they 
would defer principal repayments on their bonds through June 
2020. The proposal was issued by an ad hoc group of GO 
bondholders, including mutual funds and others, represented by 
the law firm Paul Weiss Rifkind Wharton & Garrison.    
    In addition, the creditors said they would buy approximately 
$750 million in new debt at a 7 percent annual coupon and no 
principal repayments until 2020. 
    "This exchange would save the Commonwealth $1.9 billion in 
debt service payments over the next five years," according to 
the document. 
    Puerto Rico's government said the proposal failed "to solve 
the severe and real challenges" facing Puerto Rico. 
    "Incurring additional debt at a higher cost is not the 
answer to the Commonwealth's fiscal issues," Melba Acosta, 
president of Puerto Rico's Government Development Bank, said in 
a statement. "Indeed it is exactly the type of 'Wall Street' 
solution that led us to the precipice we are now looking over." 
    The same bondholders earlier criticized legislation 
currently being rushed through Puerto Rico's Senate and House on 
Tuesday that would halt bond payments ahead of a $422 million 
debt bill owed by the Government Development Bank due on May 1. 
    The Senate approved the controversial legislation early on 
Tuesday morning while the House continued its debate. It is 
expected to vote before the end of the day. 
    "While we would like to negotiate with the Puerto Rican 
Government in private and in good faith, the debt moratorium it 
has proposed that is before the Puerto Rican legislature has 
prompted this public release," Andrew Rosenberg, a lawyer with 
Paul, Weiss said in a statement accompanying the proposal. 
    GO debt is backed by the full faith and credit of the 
government and is typically the senior debt paid before all 
others. 
 
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Puerto Rico bondholders critical of government debt moratorium 
bill     urn:newsml:reuters.com:*:nL2N17810Z 
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 (Reporting By Nick Brown in San Juan; Writing by Daniel Bases; 
Editing by Bernard Orr and Sandra Maler) 
 ((daniel.bases@thomsonreuters.com; +1 646 223 6131; Reuters 
Messaging: daniel.bases.reuters.com@reuters.net; Twitter: 
@djbases)) 
 
Keywords: PUERTORICO DEBT/PROPOSAL