Puerto Rican government and Federal Financial Supervisory Board that manages the finances of the US region has approved a debt restructuring plan that could put an end to The largest bankruptcy proceeding in the history of the United Stateswhich started in 2017.
Puerto Rican Governor Pedro Pierluisi told NBC News on Thursday that Mr Federal Oversight Board They agreed to amend their previous version of the plan to scrap pension cuts and provide more funding for the island’s public university system, after long-running disagreements over both issues.
Changes will be aligned with file new law Signed by Pierluisi on Wednesday that promises to provide $500 million annually to the University of Puerto Rico through fiscal year 2027 and “Zero reductions in pensions for current retirees and current accrued benefits for active public servants. “
while the Federal Oversight Board Agreed Thursday to roll back the proposed 8.5 percent cut to pensions over $1,500, the law remains “open and very vague as to what happens to future pensioners, people who still work and contribute to certain public benefits and contribution plans,” Sergio. Markswatch, director of policy at a Puerto Rican-based nonpartisan think tank Center for a new economy, for NBC News.
The debt restructuring agreement now goes to US District Judge Laura Taylor Swain, who is handling the bankruptcy proceedings, after a series of court hearings, starting on November 8.
If confirmed, the agreement would effectively reduce Puerto Rico’s annual public debt payments to $1.1 billion, from $3.3 billion. At the same time, the island’s debt service will be reduced to 7.5 percent from 25 percent.
Puerto Rico’s $70 billion public debt could drop to $34 billion, while Public Buildings Authority and Public Liability Bonds debt could be reduced to $7.4 billion, from $18.8 billion.
“It will result in huge savings for Puerto Rico,” Pierluisi said. “We will pay a third of the debt service we were paying before this bankruptcy process began.”
“I’m confident it’s an affordable adjustment plan, and we hope to have that bankruptcy behind us in the very near future,” he said.
But Markswash said that also meant Puerto Rico was essentially going to commit to a third of our budget, using this year’s budget as a baseline, and we haven’t even talked about paying public schools and police officers and any other jobs to keep the Puerto Rican government running.”
“The more we have less money, the more difficult it will be to meet all the commitments,” he said.
The latest debt restructuring agreement comes after nearly five years of repayment negotiations with bondholders who own Puerto Rican debt. These debts have accumulated after decades of excessive borrowing, mismanagement and corruption.
The Federal Financial Council Created during the Obama administration under the Promesa Act of 2016 following the laws of the United States US territory arbitrarily excluded from federal bankruptcy law. The board of directors was overseeing the renegotiations, a process that led to severe austerity measures as Puerto Rico tried to spur its economic growth. It also generated nearly $1 billion in profits for the attorneys involved.
“The cost of the bankruptcy was paid from public funds owned by the Puerto Rican government, which were paid by Puerto Rican taxpayers,” Pierluisi said. “All the federal government has done in this is to provide Puerto Rico with a mechanism for debt restructuring.”
Markswatch said future debt payments would also be passed on to Puerto Ricans on the island, a financial commitment that could last for at least three decades.
If Swain rejects the debt restructuring agreement, the Federal Financial Supervisory Board Bondholders will have to pursue further negotiations, a process that could take weeks or even months.