Puerto Rico gets investors' OK to reduce debt load by $24 billion, inching closer to the end of bankruptcy
Puerto Rico gets investors' OK to reduce debt load by $24 billion, inching closer to the end of bankruptcyPuerto Rico struck a deal with bondholders Sunday that reduces debt by $24 billion while agreeing to pay back debt 10 years sooner than before.Wanda Vázquez, governor of Puerto Rico, opposes the new deal on the grounds that it protects bondholders more than retirees.A deal between Puerto Rico and creditors could inch the country one step closer to an exit from bankruptcy.
The Financial Oversight Board reached a deal with bondholders Sunday that would write off $24 billion in debt, reducing $35 billion in original debt to under $11 billion. That cuts $1 billion more debt than Puerto Rico previously planned to. In exchange, Puerto Rico would pay off all legacy debt in 20 years, which is 10 years sooner than it had previously agreed to, the board said in aPuerto Rico declared banruptcy in 2017 in order to restructure around $120 billion in debt and liabilities,.
Still, that recovers more value compared to the 36% and 65% value reductions, respectively, set in the September agreement, Reuters reported. "The new and more favorable agreement is a win for Puerto Rico," said the oversight board's chairman Jose Carrión in the statement, adding that the deal has much more more support from bondholders than the September deal did.
But the plan still needs the support of Puerto Rico's legislature and a federal judge — and Puerto Rico's governor, Wanda Vázquez, opposes the deal because it improves protections for bondholders but makes no similar new accomodations for pension holders,The new deal made no changes to pension policy. As it stands, around 75% of pension holders, retired now or later, will not see their benefits change — but some could see their monthly retirement benefits fall by as much as 8.
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