Puerto Rico bondholders at a meeting Thursday sought substantially better terms from the Puerto Rico Oversight Board and government, according to a person familiar with the talks.

Lawyers representing holders of general obligation and Puerto Rico Sales Tax Financing Corp. (COFINA) bonds said that the board’s plan to allot $800 million per year for debt service was a “non-starter,” the person said. The bondholders sought at least $1.3 billion to $1.4 billion in debt service per year. This would be in the ballpark of 40% of debt service due each year.

Puerto Rico Oversight Board chairman José Carrión III (center).
Puerto Rico Oversight Board chairman José Carrión III (center).

On the other hand, Puerto Rico’s government, represented by Rothschild & Co., is promoting the idea of growth bonds. These sorts of bonds would pay out more if Puerto Rico experienced economic growth than if there was continued contraction.

The board, led by chairman José Carrión III, released a fiscal plan in March that would allow payment of 24% of debt due over the next 9.5 fiscal years. The talks are aimed at reaching a consensus over restructured debt terms before May 1, when a court bankruptcy process is expected to start

The meeting is scheduled to continue Friday.

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