Puerto Rico’s government put its Highways and Transportation Authority and Employees Retirement System into Title III bankruptcy, affecting $9.5 billion in debt.
The government filed the cases Sunday in the U.S. District Court in San Juan, according to Puerto Rico’s Fiscal Agency and Financial Advisory Authority.
Puerto Rico Gov. Ricardo Rosselló said he sought to protect pensioners and the transportation system by putting two agencies into bankruptcy and asked the Puerto Rico Oversight Board to put the two entities into Title III. Title III is a bankruptcy-like process within the Puerto Rico Oversight, Management, and Economic Stability Act.
According to a statement from Rosselló, he put HTA into title III becauses its creditors “categorically rejected” the Puerto Rico fiscal plan as a basis for negotiations and have recently started legal actions to undermine the public corporation’s stability. In the board-approved HTA fiscal plan, there would be no debt service paid through at least fiscal year 2026. The board approved this fiscal plan in late April.
There are conflicting reports of how much debt HTA has outstanding. According to the board’s approved Puerto Rico fiscal plan of mid-March, the HTA had $4.2 billion in debt outstanding as of February. Of this $4.1 billion was bond principal and $135 million was capital appreciation bonds.
According to the approved HTA fiscal plan the authority has $6.35 billion in debt. This plan added $1.81 billion in expired Government Development Bank for Puerto Rico lines of credit. The HTA fiscal plan indicates the authority has $4.57 billion in bond debt outstanding.
Regarding the Employees Retirement System, the governor said he filed for Title III because it faced insolvency in the coming months and because his government couldn’t reach a consensual deal with its creditors. Rosselló said that pensioners will continue to receive their pensions from the General Fund after the ERS runs out of money.
As of February the ERS had $3.2 billion in debt, of which $2.7 billion was bond principal and $500 million was capital appreciation bonds.
The complaint filed with the Title III for Puerto Rico itself, filed May 3, noted the need to restructure the pensions' liabilities. As of June 30, 2015 Puerto Rico’s three principal retirement systems had total pension liabilities of $49.6 billion. The systems are projected to be out of money between July and December 2017, according to the initial Puerto Rico filing
The board has already put Puerto Rico’s government and the Puerto Rico Sales Tax Financing Corp. (COFINA) into Title III. With the HTA and ERS joining this there is a total of $38.5 billion of debt in Title III out of the Puerto Rico government’s total $51.9 billion debt. Fully and semi-autonomous entities in Puerto Rico owe an additional $22.3 billion of public sector debt.
The Puerto Rico Electric Power Authority and the Government Development Bank for Puerto Rico are seeking the board’s approval for their debt restructuring plans that they reached with their creditors. The former had $9 billion in debt outstanding and the latter had $3.2 billion outstanding, both as of February.
They want the board to approve the plans through Title VI of PROMESA. If the board approves the plans, a court would also have to approve them.
The board has treated PREPA as a semi-autonomous entity and the GDB as part of Puerto Rico’s government.