Puerto Rico's government is seeking several years of reduced debt service payments, according to the governor and his staff.
Gov. Alejandro García Padilla on Monday said he'd created a Working Group for the Economic Recovery of Puerto Rico, led by Chief of Staff Victor Suarez, Government Development Bank President Melba Acosta, Secretary of Justice César Miranda, and the Presidents of the Senate and House, Eduardo Bhatia and Jaime Perell-. The group will begin conversations to achieve a consensus on the restructuring of Puerto Rico's public debt. "The ultimate goal is a negotiated moratorium with bondholders to postpone debt payments a number of years, so that the money can be invested here in Puerto Rico." García Padilla said in a speech, delivered in Spanish.
The official English translation didn't include the word moratorium. According to a staff member in the governor's office, Acosta said Tuesday morning that the government was not seeking a complete moratorium on debt payments.
Acosta will be meeting with bondholders and people in the bond industry in New York City and Washington, D.C. in the next week or two to discuss restructuring of the bonds, the staff member said. Acosta is still trying to figure out "how to approach" different groups of Puerto Rico bondholders.
While there is about $72 billion of total outstanding Puerto Rico public sector debt, it remains to be seen how much of this the governor and his administration wants, or is practically able, to negotiate. Some of the debt is held by completely independent cities. Other debt is held by largely independent public corporations. As for the commonwealth government's debt proper, there is no bankruptcy process for the governor to try to use.
García Padilla spoke in the aftermath of a report issued by economic consultants on Monday, "Puerto Rico - A Way Forward," that said that the commonwealth government could not pay all of its debt even if it took strong measures to cut spending and increase revenues.
The governor said, "All the measures we have taken in the last two years reflect our willingness to pay and, had we not taken them, we would not be in a position today to request restructuring. We have done all that was within our power, but, as the report makes clear, the next step must be to ensure more favorable terms for the repayment of our debt."
Full story to follow.
