Puerto Rico exits bankruptcy after grueling debt negotiation
SAN JUAN — Puerto Rico’s government formally exited bankruptcy Tuesday, completing the largest public debt restructuring in US history after announcing nearly seven years ago that it was unable to pay its more than $70 billion debt.
2022-03-17 20:31:26 - VI News Staff
The exit means that the American Caribbean territory’s government will resume billion-dollar payments to bondholders for the first time in several years, settle some $1 billion worth of claims filed by residents and local businesses and issue more than $10 billion worth of bonds. The government also will restore up to $1.3 billion taken from a public pension system.
“This is a significant success,” said Natalie Jaresko, executive director of the federal control board that oversees Puerto Rico’s finances and its debt restructuring process. “Remaining in bankruptcy has been a drag on the economy in multiple ways.”
The bankruptcy led to widely criticized austerity measures on an island that paid some $1 billion in fees to consultants and lawyers and in other expenses during the process.
The exit was a priority for the board and Jaresko, who previously announced she is retiring April 1. A replacement has not been named yet. The board is expected to remain in place until Puerto Rico has four consecutive balanced budgets, a feat that has yet to be achieved.
The debt restructuring plan was approved by a federal judge in January. It reduces claims against Puerto Rico’s government from $33 billion to just over $7.4 billion, with 7 cents of every taxpayer dollar going to debt service, compared with 25 cents previously.
“This is a transcendental moment,” said Gov. Pedro Pierluisi. “The plan is not perfect … but it has a lot of good things.”
The board has clashed several times with Pierluisi and previous administrations, particularly on a proposal to reduce certain monthly pension benefits that was ultimately scrapped.
The plan also creates a public pension reserve trust that will be funded with more than $10 billion in upcoming years.
“For decades, past governments have neglected to put aside enough money,” Jaresko said.
While many celebrated Puerto Rico’s exit from bankruptcy, Jaresko said it is unlikely the island will be able to access financial markets soon because it has yet to get its audited financial statements up to date.