Puerto Rico canceled a negotiating session with general obligation bondholders Wednesday, contributing to their concern that the government isn't actively working toward a consensual restructuring.
According a person familiar with the GO bondholders with several billion dollars of debt, the cancelation also fueled dismay over Gov. Alejandro García Padilla's recent suggestions that they are unwilling to negotiate the debt. From the bondholders' perspective, it has been Puerto Rico's government that has avoided negotiations.
Puerto Rico's public sector owes about $70 billion in debt. Puerto Rico's government owes a portion of this, the Government Development Bank for Puerto Rico and public corporations owes another portion, and the island's municipalities owe a smaller sliver. Last summer García Padilla said the debt could not be paid back as currently structured and with current economic growth rates. Puerto Rico officials have pressed U.S. Congress to pass legislation giving the territory's creditors authority to restructure debt under bankruptcy – a measure opposed by Republican leaders.
Puerto Rico's government met with representatives of Puerto Rico's bondholders at the offices of Cleary Gottlieb Steen & Hamilton in New York City on Nov. 20, according to several sources. Cleary Gottlieb is one of the law firms representing Puerto Rico in its efforts to restructure its debt.
At that meeting Puerto Rico proposed a structure for repayment of its bond debt, but didn't provide any terms. The bondholders were happy that discussions had started, the GO bondholder source said. Both sides agreed to continue meeting and discussing the possible terms.
Since then Puerto Rico has canceled at least two meetings planned to discuss restructuring the debt, including the one scheduled to take place Wednesday, the GO bondholder source said.
Recently, he said, GO bondholders have started to reach out to representatives of senior COFINA (Puerto Rico Sales Tax Finance Corp.) bondholders and of other Puerto Rico bondholders to come up with their own debt restructuring plan.
Representatives of the GDB, which oversees Puerto Rico's debt, didn't immediately comment for this story.
