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In the years leading up to 2017, Puerto Rico accumulated unbearable debt when it filed for bankruptcy.
Years of debt accumulation, catastrophic hurricanes, political turmoil and a long epidemic are just some of the challenges facing Puerto Rico when it receives US court approval to restructure its debt.
Federal Judge Laura Taylor Sweeney’s decision to give the green light to the island’s plan to end bankruptcy will end almost five years of litigation and make it easier to return to the capital markets.
Puerto Rico accumulated unbearable debt in the years leading up to 2017, declared bankruptcy and began the process of restructuring its multi-million dollar debt of more than $ 70 billion.
At the time, the island was in the throes of a severe economic crisis. It has a poverty rate of 45%, an unemployment rate of 12% – twice the US average – and its population has largely migrated.
Call Adjustment plan The loan, approved Tuesday, was proposed by a federal-appointed financial oversight committee, which includes a series of lenders’ contracts, reducing the $ 33 billion bond debt to $ 7 billion. Annual loan repaymentThey were reduced By 80%.
The plan also includes protections that will limit how much debt Puerto Rico can borrow in the future, according to the Reuters news agency.
Image source, Reuters
In May 2017, when Puerto Rico filed for bankruptcy, the island was in the midst of a political crisis.
Coming out of bankruptcy will allow Puerto Rico to overcome the default, encourage new investment to improve its exhausted economy and restructure its infrastructure, including its weak power grid.
“Broad but not universal support”
In announcing his decision, Judge Swain noted that the plan “lacks broad but universal support” and that many public workers and retirees disagree with certain aspects.
The Board of Supervisors has stated that most retired officers will receive full pensions under the scheme. But despite that, The scheme abolishes limited pension schemes involving tens of thousands of teachers and judges.
The board said in a statement on Tuesday that it welcomed Swine’s decision, but that Puerto Rico “must continue to reform itself to ensure a prosperous future.”
He said the ruling “does not preclude further investigation into the origin of Puerto Rico’s debt crisis, through regulatory, law enforcement or civil litigation means.”
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Retirement of some Puerto Ricans is one of the most important points in Puerto Rico’s debt restructuring program.
The debt adjustment scheme is expected to come into effect from March 15. The Board of Supervisors will remain in place until Puerto Rico has four consecutive years of balanced budgets.
The cost of the case is approx $ 1 billion in legal fees, Something that sparked criticism as well.
Although this is a major restructuring, this is not the first time a U.S. unit has sought debt relief under court supervision.
The cities of Detroit (Michigan), Jefferson County (Alabama), Orange County and Stockton, San Bernardino (California) have taken a similar path to clean up their funds in the past, although Puerto Rico is the largest local lender. Restoration in American History.
Reactions
With the approval of the Financial Supervision Board (JSF) adjustment plan, it said, “a new chapter in the history of Puerto Rico begins today.”
For his part, Puerto Rican Governor Pedro Pierre Lucci praised Judge Swine’s decision in seven tweets, in which he spoke of the island’s “deepest moment” and said the deal was “although it’s not perfect”. Very good for Puerto Rico. ”
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